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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we will discuss what the prospect of higher rates for longer an economic weakness in China could mean for the commodity space.
TD Securities Bart Melek is our guest. MoneyTalk's Anthony Okolie is going to have a look at a new report from TD Economics on the global inflation outlook.
and in today's WebBroker education segment, Nugwa Haruna's going to walk us through the difference between the primary and secondary markets and how you can get access to them both on WebBroker.
So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to our guest of the day, let's get you an update on the markets. We have some green on the screen. You'll start you at home with the TSX Composite Index.
Triple digit gain of 182 points. He gobbled up about 10 bucks per outs, you got West Texas intermediate crude above 80 bucks a barrel, so that's helping out some of the heavyweight sectors. Among the most actively traded names on the TSX, given that, is Suncor.
Let's check in on this one now. It's up about 1%. Some green on the skin among energy names.
BlackBerry is giving a bid back today.
Call on Friday or maybe you are on vacation on Friday, he got a bit of a bump on unconfirmed reports that perhaps there was a takeover bid in the offing. At seven bucks in a penny today, a pullback about a percent but it did get quite a popon Friday. Let's look at the S&P 500. Jackson Hole is now a memory. Jerome Powell spoke. He said a lot of the things that we've heard before.
interest will be higher for longer.
Green on the screen.
It's been a bumpy ride for stocks in August. Right now, you're up about 13 1/2 points or 1/3 of a percent. The tech heavy NASDAQ, let's see how that's bearing against the broader market.
It's doing about the same. About 1/3 of a percent the upside. Bank of America getting a bit of a bid.
it is modest.
and 2878, you're up about 1% on the name. And that's your market update.
Fed chair Jerome Powell has signalled that rates may be higher for longer as inflation remains sticky.
So what does that mean for the commodity space going forward?
Joining us now to discuss is Bart Melek, global head of commodity strategy with TD Securities. Bart, great to have you back on the program.
>> Great to be here. Thank you for inviting me.
>> We brought another Jackson Hole. Jerome Powell gave a speech. They seem to be staying the course. The fight for inflation is going positive, it's far from over.
What do we think in terms of commodities?
>> This is I think for the most part somewhat negative for commodities, gold, copper, even oil.
Probably won't respond overly favourably, though oil has its own set of drivers on the supply side that will protect it from the impact of interest rates.
But for the most part, higher interest rates essentially mean a higher cost of carrying and higher opportunity costs for commodity holders. On the margin, that implies you might want to hold lower inventories.
You might want to go lease out things like gold, silver to the broader market and make physical metal more available.
So all in all, it is a negative. To what extent it is a negative will very much depend of how high rates go and how long they stay there.
The higher they go, the more negative it is. The longer they stay there, obviously, it is somewhat more negative. At this point, I think we are still unsure of how high they go and for how long they stay up there.
>> At this stage of the hiking cycle, you're actually in a place where people are talking about real rates and the effect that might have. I think we have a picture we can show the audience.
Rising real rates weighing on gold.
>> Yes, typically, that's true. When we look at gold and when we look at the variables that impact gold, real rates are probably the most… The most… >> Telling?
>> The most telling, yeah. It's one of the biggest indicators of how gold will do and certainly, over the short run, as the Federal Reserve keeps ratesat 550 or somewhat higher for a long period, and inflation starts moving lower, ironically, what you will likely get is even higher real rates.
so real rates are really just defined as nominal rates less inflation. So for a time, as inflation drops, policy actually gets tighter even if the central bank doesn't do anything, even if they hold rates steady, even if they drop it a little bit, the environment can become more restrictive in that circumstance. So that can be quite a negative. We are, of course, betting that the Fed will start moving in the first three months of next year, probably in March.
But we are still not sure how core inflation, how inflationwill respond but for now, as inflation drops, that could actually be worse for the market than I think most people realize.
>> Is the best explanation I've heard of real rates and how they passed through the economy in a long time, so thanks for that.
Let's talk about oil. You talk about oil feeling the weight of higher rates, but having its own factors as well. We got oil above 80 bucks per bell right now on my screen. That could be inflationary too.
>> Certainly, in fact, for the last two months, we have seen significantly higher oil prices but as far as inflation is concerned, it's not really oil that drives us.
It's gasoline and diesel. None of us put actual oil in the gas tank because probably we would break the car.
We put refined products in there. And those who actually outperformed the accrued market and part of the reason here is that inventories are very, very low, particularly on the heavier mineral distillate side. As we move forward, we are still looking at demand of 2 million barrels per day this year. Not only will we have to satisfy the demand to fill your car up, but we will have to running crew through the refining system to try to lift those inventories. So that kind of puts a bigger stress on the demand side than I think otherwise.
So it's not just a current demand, it's also extra demand to refill those very low inventories.
Right now,spreads are quite high and that's just the premium, if you like, of products versus the input, the oil, they are quite high. I think for diesel, it's almost $50 or so. And that means that there is a lot of incentive on the part of refiners to process as much crude as they possibly can. They are making a good book out of it, so why not?
Inventories are low, they don't really have to worry about prices collapsing anytime soon. Demand is firm.
So as we move into the wintertime, as we use oil for heating and so on, we could see that spread continue to be quite robust and that will continue also to drive demand over and above what the macroeconomy is doing, and, of course, we are facing some challenges in the macroeconomy with higher rates. Many people, including us, are talking about a recession in the United States, China.
> Let's bring up China. If like this has been sort of like the economic elephant just sitting off here to the side because of these other issues.
The economy is not going gangbusters there and they are not doing all that much.
They are doing a few things around the margins to get it going again.
>> We have not seen aggressive stimulus.
There are those that think that will come but so far, we have seen very modest measures.
we will see what happens.
I expect the worst things get, the morestimulus you will get, but China has a big problem with youth unemployment, young people are facing a lot of problems finding jobs.
They have, if you recall, The economy shuttered for a lot longer than anybody else and we didn't see the sort of government supports that we have seen in the Western world. I think many believed that confidence has been eroded a great deal. We are seeing that in general consumption, we are seeing the very much in the real estate market, which is a very big user of commodities.
And it's going to take a while.
But still, the fact of the matter is people are no longer locked up in their house, so it's better than it was during COVID. But I think many observers are quite disappointed with the broad numbers.
>> Great start to the program. As always, you're going to get your questions about commodities for Bart Melek and just moments time.
A reminder, of course, that you can get in touch with us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Canadian autoworkers at the Big Three have given their union a strike mandate amid negotiations for a new collective agreement. Unifor says members of the Canadian operations of Ford, General Motors and Stellantis voted overwhelmingly in favour of the mandate.
Members of the United Auto Workers delivered a similar strike mandate south of the border. Such mandates, course, can be invoked and result in a strike of the talks, which are ongoing at this point, break down without a new collective agreement.
Shares of troubled Chinese property developer Evergrande plunged as they resumed trading in Hong Kong. The company is carrying a heavy debt load and is attending to restructure amid a serious downturn in China's real estate market. The Evergrande shares closed down 79% in Hong Kong today, and that a race more than $2 billion in US market value in just one session.
Let's take a look at Boston Scientific, one of the most actively traded names on the New York Stock Exchange today. The maker of medical devices announcing positive results for its treatment for abnormal heartbeats in a 12 month clinical trial.
We see the market like the news.
At 5330 per share, you got Boston Scientific up a little more than 5%. A quick check in on the markets, we will start here at home in Bay Street with TSX Composite Index.
The price of gold is higher. We have the price American benchmark crude modestly higher.
There has been some green on the screen. It's the first trading day of the week. Hundred and 80 points, a little shy of a full percent. South of the border, let's check in on the S&P 500, the broader read of the American market. You can see right now it's modest, it's up about 15 points or 1/3 of a percent.
Okay, we are back with Bart Melek, taking your questions about commodities. Plenty of tongue twisters to come. What is the outlook for silver, Bart?
>> I like silver.
the longer I look forward, the more I like it.
I think in the very near term, over the next few months, I think there will continue to be some downward pressures stemming from higher carry costs for carrying gold, her opportunity costs and, of course, we have already said that the global economy, particularly the industrial side, isn't doing great and silver is not only a monetary metal but increasingly it is an industrial metal, so those things slow down a little bit, we can certainly see silver be under some pressure.
We have seen it. It was at around $23 recently, it popped up to around 24. But over the next little while, we don't really see a lot of upside. However, as we move longer term this year, for example, we are expecting hundred and 20 million deficit in silver and we are expecting deficits for the next few years as well.
And why the deficits? Let's start off with the simple part, the supply side.
The supply-side doesn't look so great. There isn't a lot of investment in critical metals. And what I say metals, not to silver? Well, is silver investments as majority comes as a byproduct of zinc, copper, lead, gold mining. We haven't seen a lot of investment in there.
so the mining side is not looking particularly robust in terms of supply growth over the long term. But demand-side, demand-side is going to look pretty good the further we go into the future.
we are going to be using silver increasingly in solar panels to move into a net zeroglobal economy, electrification. Essentially, that means you are going to be using a lot more interruptible's and solar panels are one with new types of solar panels coming out, more silver for that.
As we move into EVs, there will be a lot more silver being used in vehicles and that is mainly because… >> Circuit boards, right?
>> Yeah, circuit boards. They are smart vehicles.
They have a lot of electronics and the previous versions of these vehicles, the ice vehicles, internal combustion ones, contained relatively little silver.
Now we can see upwards of 2 ounces and you consider that we produce some hundred million ounces, vehicles, a year, and that's potentially a lot of silver in cars.
Of course, there are the smart grids. Again, more electronic components which you silver from everything from circuit boards to capacitors and so on and there is the smart devices using 5G. So all of that essentially means that silver demand looks pretty good and also for catalysts, also for chemical industry.
Silver is looking pretty good.
I would classify it as a critical metal that is going to be essential in the transformation to a net zero economy around the world, and we are not really investing significantlyin the primary or secondary sources of silver, and I think as we go forward, those deficits are going to a road above ground inventories and I think, over the long run, we could very well see silver materially above the $26 mark which we think about the very top of the cost curve which is probably one of the better performing metals. We often don't talk about silver when we talk about net zero, but I think it's important to note that silver is going to be increasingly a factor.
>> Alright, so some interesting near-term perhaps pressures but longer term some interesting ideas there for viewers to try to weigh off and do a little homework on. Let's take another question now. We talked off the top of the showabout the fed, higher interest rates.
A viewer wants to get your view on gold.
I've got 1923 an ounce on my screen here.
>> Yes.
I think… I have some bad news short run, I think. We could still friend below $1900 here. And again,the Federal Reserve is right intent on keeping interest rates higher for longer. We are not sure if they are going to go in September or October.
that will very much depend on what the data looks like, the CPI.
>> By go we mean go higher, right?
>> That's correct.
We sing, a TD Securities, that probably marches when they will start cutting. But that is by no means a guarantee. We are yet to see poor economic numbers.
We have been surprising to the upside across the board.
Employment has slumped a little bit but it is still problematic as far as the Fed's concern.
Unemployment is still very much near a 50 year low.
Wages are growing. The retail side of the consumer is showing strength, so the Fed is taking a very cautionary view here. I don't think Mr. Jerome Powell wants to be the one to let the inflation genie out of the bottle here and he is talking, I think, quite convincingly that he is already to do whatever he needs to do to keep inflation at bay and have it dropped to the 2% target.
So no big surprise that this is what we are hearing from the central bank, but we suspect that you're gonna get weakness later in the year into 2024 and that will most likely precipitate lower rates.
What does that mean? That if we do, in fact, go below 1900 bucks, at the end… >> Does it have people emboldened in betting against gold?
>> We have seen a lot of erosion in exposure, as you can see on the chart there. There are not a lot of speculative traders that have gone too long. However, we are seeing very strong demand from central banks.
Physical buyers, investors buying physical bars, not necessarily ETFs or contained in ETF, those bars, but those going, physical bars, we are seeing that strengthening as people worry, in China, for example, about the robustness of their currency.
We are noticing more strength, the premiums in China are strong and they have much more faith in gold in the Western markets do. So we like it.
$2100 late 23, early 24, is quite possible.
If you take the trading ranges, that's an average we are talking about. We could see something more than that. High debt, central bank buying, geopolitical risk, you know, considerable risk that some are seeing of monetization, massive government deficits and no real plan to pay for it has people confident that gold will do well and many investors are already starting to buy on the physical side. We are not really seeing it from these so-called sophisticated financial players but we think that comes as the Federal Reserve pivots at some point.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions.
we are going to get back to your questions for Bart Melek on commodities in just a moment time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.
com.
Now let's get to our educational segment of the day.
When you are looking to purchase an investment, there are two types of markets available to you: the primary and secondary markets. Here to explain the difference in how you get access to them on WebBroker isNugwa Haruna, Senior client education instructor with TD Direct Investing. Nugwa, always great to see you. Walk us through the primary and secondary markets.
Tell us how they are different and we will dig into how we can get into them on WebBroker.
>> Yeah, so when it comes to the opportunity to purchase securities, investors are presented as primary and secondary markets as opportunities. A lot of people may not be familiar with the primary market because that's wherewhen corporations and governments are looking to raise funds, they will seek out investors and they can do this by either offering a portion themselves so they will do that through stocks or they might actually borrow money from the public and that would be done through things like bonds.
And so when the securities are first issued, this is typically done through an IPO or an initial public offering.
Then, investors have an opportunity to become a part owner if you are buying socks, for instance, or become a creditor if you are purchasing bonds from these corporations or governments. On the other hand, we have the secondary market.
Most people will be familiar with this because when you go to purchase securities, for instance, in WebBroker, you are buying things on the secondary market. Just gonna shows real quick. Let's hop into WebBroker and I will show you an example of the secondary market.
Once in WebBroker, if I click on research and let's go to stocks, so once I am on a specific page, I will keep the stock I have on here right now. If I go to purchase this, Greg, I actually buy this from another investor.
I'm not buying the stock directly from Apple the corporation. You will see that over 17 million securities have traded today and this is happened between investors.
This is the stock market.
There is also a secondary market for things like bonds.
In WebBroker, if you click on research, underinvestment, if you go fixed income, this is where you will find I like to call them certified preowned bonds and when you buy these, you are also not buying these directly from the corporation, you are buying it from an investment dealer.
The money you put in these don't go directly to the corporation.
That's the fundamental difference between the primary and secondary markets.
> Okay, so now we understand. He said obviously people perhaps didn't even recognize that they are buying socks, they might be on the secondary market. Let's talk about the primary market, the one that we don't perhaps avail ourselves of a lot.
How to get access to it WebBroker?
>> Yeah, so, when it comes to accessing the primary market, you can do this in WebBroker, and I will show you how to find securities that are listed on the primary market.
So once in WebBroker, you're going to click on the tab that says trading, and once you do that, under the buy and sell tab, you're going to click new issues.
One thing I want to highlight is that not all new issues are IPOs or initial public offerings and that's because corporations and governments who already have some kind of security at there might be looking to raise more funds. When they are doing that, they may actually have new issues. So these are not initial public offerings. Also I want to mention that when you are looking at these, you will notice that they are Canadian-based and that is because the US and international markets, because of regulatory restrictions, don't do initial public offerings in Canada.
but if you do decide that you want to participate in the primary markets, you can do this, I'm just going to highlight the first one we have here.
You can dig deeper by simply clicking on that security there and you can pull up that prospectus, very important if you want to know exactly what you are investing in with the terms and conditions are.
But if you decide that you want to go ahead with this security, you someday want to highlight that security and then click place expression of interest. Now, I will mention that even though it's called an expression of interest, this is a firm offer to buy. Here, you'd be able to see what the minimum as well as maximum quantity you could purchase would be. It's not typically 5 million, but I'm just giving you an example.
You want to be aware though that when you do put in an offer, you might get a fulfilled, you might get a partial fill, you might actually get no fill at all so that's something to keep in mind because this is based on a first-come, first-served basis. One last thing I will highlight is that he was an investor may say well, I don't have the time to come in here every day to check out what is listed in new issues. Well, you can actually set up a notification to receive a notification anytime and you issue pops up.
It so to do that, you will simply click on update profile.
You want to add your email address and then, you are able to select the specific securities you want to get alerts about any time there is a new issue, you will update your profile and that way you will stay updated and you might have an opportunity to express interest.
>> Fashion except as always, Nugwa. Thanks for that.
Dashing for having me.
>> Nugwa Haruna, Senior client education instructor with TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Bart Melek, taking your questions about commodities. This one just coming in in the past couple of minutes. What's your medium and long term outlook on lithium and nickel commodities given their importance for EV production?
>> Well, I'm not going to give specific numbers because I'm not sure I can be 100% confident of, broadly speaking, short running, I think it's always difficult for lithium and nickel and mainly because there's a lot of volatility, demand is not particularly steady. We have seen lithium go up and down depending on the latest view on where batteries are going. The same thing has been happening with nickel. But I think beyond the short-term when we look into the medium outlook and long term, I think the outlook is quite good as the share of global vehicles sold tilts into EVs. And I think increasingly, we are going to be using these metals for these batteries, these battery systems, and I think, at some point, we are going to have to have a price that is high enough to incentivize mining and processing in North America because, right now, the vast majority of the processing is still in China.
There is no guarantee that they would be willing to give us all of the metal that we needed for this emerging industry.
So I think prices will have to go significantly higher to guarantee supplies and I'm very unspecific as to where that level is.
We really haven't done enough research to call that long term, but my feeling is that it's going to be significantly higher because you're going to need cash flows to incentivize the risky investment. Of course, there are risks that technology shifts more into hydrogen and others, so this isn't without risk either, but we are confident that these metals will do well.
>> This next question, sort of along the same vein, someone wants to know about the importance of platinum for metals for the auto industry.
>> That is a tricky one, and again, I'm being a little, you know, doing a little gymnastics here between the short and long run.
So platinum is a catalyst metal.
It's not only used in the jewelry industry but it is a very, very important at all for auto catalysts and that is part of the car that reduces noxious fumes and reduces pollution.
For a major run, there is a bit of a concern here that, as we move into EVs, which don't use oil based fuels, that you might need less metal because there might be less demand for auto catalysts because you are using EVs. We are not convinced that is actually going to happen. That is a concern some in the market have and we think that we are going to do both, we are going to do hybrids and EVs at the same time and as we move forward, there is going to be a convincing move toward hydrogen as well. That might take a little while, but platinum is an essential metal for hydrogen.
It is used on the one and to extract hydrogen from water, electrolysis, and that is also used in the fuel cells to extract or produce electricity given the input of hydrogen into the cells.
So I think the future is great. And on the investment side, we continue to have problems attracting investments. Africa, for example, is having current production issues.
Their electrical utility, Escom, is having problems where there is power interruption and we are not seeing as much metal as we would've expected because of these challenges. And going forward, there's no guaranteethat we are going to have sufficient metal to feed demand if the hydrogen part of the economy really takes off. But this is the more distant future and certainly there are risks associated with the metal at least in the short run. But some of the other ones, a broader slowdown in the global economy, as I said, it's a catalyst metal used in vehicles, if we do have a significant slowdown in economic activity, usually that means less motor vehicles being sold, that means less catalyst being used if you're producing less. So there are risks in the short run.
I think medium run as well. I think we are happier about the longer term.
>> Let's talk about the metal at the centre of electrification. Someone wants to get your outlook for copper and wondering if there any supply issues. If the future is electric and you need copper for that do we have the supply?
>> Well, look. If there is one metal that is going to be very hard to substitute from electrification, we have already talked about platinum, we've talked about silver, we've talked about lithium, we talked about nickel, you know, there are possible technological substitutions over the long run. Copper, I don't really see any of that. You are using a lot more copper per vehicle to run the little electrical motorsin these vehicles, the metal used for transformers, switches,any metal that you can imagine that will be needed to convert from AC to DC, to propel motors, to increase grades, it all takes a lot of copper across the entire complex. We do caution the market right now that because of the possible recession in the United States and slowdown in China and the rebound in production it could represent some challenges over the next couple of months. In fact, that's what we've been writing about. But we, again, I'm talking about the longer term, there is really nowhere near and naff investment to produce the amount of copper that will be needed in order to achieve let's say the Paris Accord targets and a net zero global economy even by 2050.
So copper probably going a lot higher.
Increasingly, the grids for the model are going down, meaning the new findings around the world are a lot poorer quality than they used to be, you get the easy stuff out first,they are looking in areas that are isolated without a lot of power grids or water, let's say somewhere in the Andes mountains, and you are going to need a higher price to create incentives to give revenuesto mining companies to invest in this.
And I think there is a growing sense of resource nationalism around the world where governments want… >> May be a bigger cut than they are getting right now.
>> A bigger cut than they are getting. And that means that will be less left for companies and let's face it, a company isn't investing in a multibillion-dollar project unless there are returns and so you might have to have even higher prices than what we were even mentioning down the road. Anything above 9 to 10,000, 12,000 to 10, I think is very feasible over the long run.
Significantly higher than what we have been used to.
But we have seen 10,000 copper and we haven't had critical shortages. So when we look forward, copper, to me, looks like one metal now probably will deliver on the promise of doing well.
>> Okay. We are going to get back to your questions for Bart Melek on commodities in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and a reminder that you can get touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.
com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Inflation continues to cool across the G-7 nations as the energy price surge from 2022 has faded.
However, the success central banks have had so far in tackling inflation, particularly core prices, is not shared equally across all nation. Our Anthony Okolie has been digging into a new report from TD Economics about it all and how the trends are going.
>> As you mentioned, TD Economics is that inflation pressures are heading down across advanced economies but getting price growth down and lined with target rates remains a challenge for most G-7 central banks.
When we look at just headline inflation, not core inflation, TD Economics is the some countries are standing a more than others, specifically Canada and the US stand out as some of the best performers, partly because with America never saw the same scale of inflation as the euro area and the UK did where in 2022 the Nat gas shock was the most profound. TD Economics also notes that in the euro area and UK, energy prices are still up significantly.
North American central banks have also made significant progress in tackling core inflation prices. In Canada, of course, we are just above3.4% year-over-year, the US is about 4.7%. It's also higher, slightly higher in the euro area. In the UK, it's running at roughly 8% year-over-year.
TD Economics also looked at the split between goods and services prices and how they differ across G7 nations and how they stack up. Price gains on the goods front eased in the EU, the UK, Canada and the USamid slowing demand and improving supply chain conditions. When it comes to services prices, they stripped that homeownership cost to make a dent.
The report looks at market implied inflation expectations and those of come down amid the central banksaggressive rate hiking over the past year.
But over the past few months, expectations have shifted higher because core inflation continues to remain sticky.
In contrast, however, consumer and business expectations for future inflation is trending lower across advanced economies, including here in Canada, the US and the euro area.
Finally, TD Economics looked at hourly wage growth across the G-7 nations, which still remains above pre-pandemic pace as job growth, or the job market remains fairly tight.
It is particularly high in the UK, where hourly wage growth hit a new post-pandemic I in me, running above 8% year-over-year, keeping pressure on the Bank of England to continue to aggressively tackle inflation.
>> That's G-7 in the West, obviously the world's second-largest economy, China, has not been able to restart its economy. What is TD Economics saying about that and what it could mean globally?
>> China's backdrop is notably different from the rest of the G-7 nations. Chinese consumer spending, factory production and investments in long-term assets like property or machinery all slumped last month and as Bart alluded to, youth unemployment has hit record highs in China while an ongoing real estate and debt crisis has investors fearing the worst. Last week, the Chinese government and surprised investors by not cutting an important interest rate that influences mortgages. China is extremely soft consumer price inflation is particularly concerning for the global economy.
The headline CPI slipped into deflationary territory in July while corporations firmed marginally to a still soft .8% year-over-year.
We can inflation pressures in China indicate tepid domestic demand and, of course, that could also mean less demand from China for goods from the US and Europe. TD Economics says that sustained weakness in China's economy will limit the potential for upside surprises in commodity prices. Great?
>> Alright. A nice guy and at the end there to what we are talking about today. Thanks, Anthony.
MoneyTalk's Anthony Okolie.
Let's get an update on the markets.
Okay, we're taking a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
This is the heat malfunction, and a picture of what's happening in the markets. We are screening by the TSX 60 by price and volume. You have a lot of green on the screen today.
You can choose the energy, financials or technology space.
Kinross popping over there on the side, up almost 4%.
In the material space, God acknowledged a bit of red on the screen. Alimentation Couche-Tard down about 1%.
South of the border, lessee was happening with the S&P 100.
It has been a bumpy August for equities. This is the last week.
Friday will be September.
He got some green on the screen here. Some tech players, looking at Mehta down in the corner up a little bit more than 1%. MMM reports are yet to be confirmed that they have perhaps reached a settlement in a lawsuit over some of their earplugs.
I own some of them as well.
You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with Bart Melek, global head quantity strategy at TD Securities. We are talking commodities.
Someone wants to talk about OPEC. OPEC+ seems to be aligning more closely with the BRICS nations. What does that mean for the commodity sector?
>> That's very good observation. We fully agree that it is happening.
There's a very good reason for that. When we look beyond 24, 25 and down the road, it is going to be the emerging market, China, India, I guess BRICS affiliated nations that will be responsible for much of demand growth, as we look to shifting very firmly into EVs, we are not going to, in the West, produce the growth that we used to in oil demand.
What does that mean?
Well, it probably means that OPEC+ behaves much less deferentially towards the United States and its allies and caters more to their other clients who will be the growth market. And that probably means that OPEC won't have a superpower like the United States having a lot of influence on their production decisions. Indeed, this is what we have seen recently where OPEC+ has cut and then Saudi Arabia has cut an additional million barrels per day, extended those cuts into September, if you recall, elevated the price from the 60s to now around $80 and brunt even higher without really an awful lot of concern about what the United States might want.
They did caution the US and maybe lectured it a little bit about selling off inventories which you probably wouldn't have seen 20 years ago where the Western world was the big client and they were a bit more geopolitically dependent on the United States. So I think there will be a shift that will be ongoing as time goes on.
>> Fashion conversation. As always, appreciate you being here. Look forward to next time.
>> It was my pleasure. I look forward to seeing you again.
> We will make sure it soon for the audience.
Our thanks to Bart Melek, global head quantity strategy that TD Securities.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show.
Jacky He, global consumer discretionary analyst with TD Asset Management will be our guest, taking your questions about consumer discretionary stocks.
A reminder that you can get this questions in ahead of time. Just email moneytalklive@td.
com.
That's all the time we have for the show today. Thanks for watching.
We will see you tomorrow.
[music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we will discuss what the prospect of higher rates for longer an economic weakness in China could mean for the commodity space.
TD Securities Bart Melek is our guest. MoneyTalk's Anthony Okolie is going to have a look at a new report from TD Economics on the global inflation outlook.
and in today's WebBroker education segment, Nugwa Haruna's going to walk us through the difference between the primary and secondary markets and how you can get access to them both on WebBroker.
So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to our guest of the day, let's get you an update on the markets. We have some green on the screen. You'll start you at home with the TSX Composite Index.
Triple digit gain of 182 points. He gobbled up about 10 bucks per outs, you got West Texas intermediate crude above 80 bucks a barrel, so that's helping out some of the heavyweight sectors. Among the most actively traded names on the TSX, given that, is Suncor.
Let's check in on this one now. It's up about 1%. Some green on the skin among energy names.
BlackBerry is giving a bid back today.
Call on Friday or maybe you are on vacation on Friday, he got a bit of a bump on unconfirmed reports that perhaps there was a takeover bid in the offing. At seven bucks in a penny today, a pullback about a percent but it did get quite a popon Friday. Let's look at the S&P 500. Jackson Hole is now a memory. Jerome Powell spoke. He said a lot of the things that we've heard before.
interest will be higher for longer.
Green on the screen.
It's been a bumpy ride for stocks in August. Right now, you're up about 13 1/2 points or 1/3 of a percent. The tech heavy NASDAQ, let's see how that's bearing against the broader market.
It's doing about the same. About 1/3 of a percent the upside. Bank of America getting a bit of a bid.
it is modest.
and 2878, you're up about 1% on the name. And that's your market update.
Fed chair Jerome Powell has signalled that rates may be higher for longer as inflation remains sticky.
So what does that mean for the commodity space going forward?
Joining us now to discuss is Bart Melek, global head of commodity strategy with TD Securities. Bart, great to have you back on the program.
>> Great to be here. Thank you for inviting me.
>> We brought another Jackson Hole. Jerome Powell gave a speech. They seem to be staying the course. The fight for inflation is going positive, it's far from over.
What do we think in terms of commodities?
>> This is I think for the most part somewhat negative for commodities, gold, copper, even oil.
Probably won't respond overly favourably, though oil has its own set of drivers on the supply side that will protect it from the impact of interest rates.
But for the most part, higher interest rates essentially mean a higher cost of carrying and higher opportunity costs for commodity holders. On the margin, that implies you might want to hold lower inventories.
You might want to go lease out things like gold, silver to the broader market and make physical metal more available.
So all in all, it is a negative. To what extent it is a negative will very much depend of how high rates go and how long they stay there.
The higher they go, the more negative it is. The longer they stay there, obviously, it is somewhat more negative. At this point, I think we are still unsure of how high they go and for how long they stay up there.
>> At this stage of the hiking cycle, you're actually in a place where people are talking about real rates and the effect that might have. I think we have a picture we can show the audience.
Rising real rates weighing on gold.
>> Yes, typically, that's true. When we look at gold and when we look at the variables that impact gold, real rates are probably the most… The most… >> Telling?
>> The most telling, yeah. It's one of the biggest indicators of how gold will do and certainly, over the short run, as the Federal Reserve keeps ratesat 550 or somewhat higher for a long period, and inflation starts moving lower, ironically, what you will likely get is even higher real rates.
so real rates are really just defined as nominal rates less inflation. So for a time, as inflation drops, policy actually gets tighter even if the central bank doesn't do anything, even if they hold rates steady, even if they drop it a little bit, the environment can become more restrictive in that circumstance. So that can be quite a negative. We are, of course, betting that the Fed will start moving in the first three months of next year, probably in March.
But we are still not sure how core inflation, how inflationwill respond but for now, as inflation drops, that could actually be worse for the market than I think most people realize.
>> Is the best explanation I've heard of real rates and how they passed through the economy in a long time, so thanks for that.
Let's talk about oil. You talk about oil feeling the weight of higher rates, but having its own factors as well. We got oil above 80 bucks per bell right now on my screen. That could be inflationary too.
>> Certainly, in fact, for the last two months, we have seen significantly higher oil prices but as far as inflation is concerned, it's not really oil that drives us.
It's gasoline and diesel. None of us put actual oil in the gas tank because probably we would break the car.
We put refined products in there. And those who actually outperformed the accrued market and part of the reason here is that inventories are very, very low, particularly on the heavier mineral distillate side. As we move forward, we are still looking at demand of 2 million barrels per day this year. Not only will we have to satisfy the demand to fill your car up, but we will have to running crew through the refining system to try to lift those inventories. So that kind of puts a bigger stress on the demand side than I think otherwise.
So it's not just a current demand, it's also extra demand to refill those very low inventories.
Right now,spreads are quite high and that's just the premium, if you like, of products versus the input, the oil, they are quite high. I think for diesel, it's almost $50 or so. And that means that there is a lot of incentive on the part of refiners to process as much crude as they possibly can. They are making a good book out of it, so why not?
Inventories are low, they don't really have to worry about prices collapsing anytime soon. Demand is firm.
So as we move into the wintertime, as we use oil for heating and so on, we could see that spread continue to be quite robust and that will continue also to drive demand over and above what the macroeconomy is doing, and, of course, we are facing some challenges in the macroeconomy with higher rates. Many people, including us, are talking about a recession in the United States, China.
> Let's bring up China. If like this has been sort of like the economic elephant just sitting off here to the side because of these other issues.
The economy is not going gangbusters there and they are not doing all that much.
They are doing a few things around the margins to get it going again.
>> We have not seen aggressive stimulus.
There are those that think that will come but so far, we have seen very modest measures.
we will see what happens.
I expect the worst things get, the morestimulus you will get, but China has a big problem with youth unemployment, young people are facing a lot of problems finding jobs.
They have, if you recall, The economy shuttered for a lot longer than anybody else and we didn't see the sort of government supports that we have seen in the Western world. I think many believed that confidence has been eroded a great deal. We are seeing that in general consumption, we are seeing the very much in the real estate market, which is a very big user of commodities.
And it's going to take a while.
But still, the fact of the matter is people are no longer locked up in their house, so it's better than it was during COVID. But I think many observers are quite disappointed with the broad numbers.
>> Great start to the program. As always, you're going to get your questions about commodities for Bart Melek and just moments time.
A reminder, of course, that you can get in touch with us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Canadian autoworkers at the Big Three have given their union a strike mandate amid negotiations for a new collective agreement. Unifor says members of the Canadian operations of Ford, General Motors and Stellantis voted overwhelmingly in favour of the mandate.
Members of the United Auto Workers delivered a similar strike mandate south of the border. Such mandates, course, can be invoked and result in a strike of the talks, which are ongoing at this point, break down without a new collective agreement.
Shares of troubled Chinese property developer Evergrande plunged as they resumed trading in Hong Kong. The company is carrying a heavy debt load and is attending to restructure amid a serious downturn in China's real estate market. The Evergrande shares closed down 79% in Hong Kong today, and that a race more than $2 billion in US market value in just one session.
Let's take a look at Boston Scientific, one of the most actively traded names on the New York Stock Exchange today. The maker of medical devices announcing positive results for its treatment for abnormal heartbeats in a 12 month clinical trial.
We see the market like the news.
At 5330 per share, you got Boston Scientific up a little more than 5%. A quick check in on the markets, we will start here at home in Bay Street with TSX Composite Index.
The price of gold is higher. We have the price American benchmark crude modestly higher.
There has been some green on the screen. It's the first trading day of the week. Hundred and 80 points, a little shy of a full percent. South of the border, let's check in on the S&P 500, the broader read of the American market. You can see right now it's modest, it's up about 15 points or 1/3 of a percent.
Okay, we are back with Bart Melek, taking your questions about commodities. Plenty of tongue twisters to come. What is the outlook for silver, Bart?
>> I like silver.
the longer I look forward, the more I like it.
I think in the very near term, over the next few months, I think there will continue to be some downward pressures stemming from higher carry costs for carrying gold, her opportunity costs and, of course, we have already said that the global economy, particularly the industrial side, isn't doing great and silver is not only a monetary metal but increasingly it is an industrial metal, so those things slow down a little bit, we can certainly see silver be under some pressure.
We have seen it. It was at around $23 recently, it popped up to around 24. But over the next little while, we don't really see a lot of upside. However, as we move longer term this year, for example, we are expecting hundred and 20 million deficit in silver and we are expecting deficits for the next few years as well.
And why the deficits? Let's start off with the simple part, the supply side.
The supply-side doesn't look so great. There isn't a lot of investment in critical metals. And what I say metals, not to silver? Well, is silver investments as majority comes as a byproduct of zinc, copper, lead, gold mining. We haven't seen a lot of investment in there.
so the mining side is not looking particularly robust in terms of supply growth over the long term. But demand-side, demand-side is going to look pretty good the further we go into the future.
we are going to be using silver increasingly in solar panels to move into a net zeroglobal economy, electrification. Essentially, that means you are going to be using a lot more interruptible's and solar panels are one with new types of solar panels coming out, more silver for that.
As we move into EVs, there will be a lot more silver being used in vehicles and that is mainly because… >> Circuit boards, right?
>> Yeah, circuit boards. They are smart vehicles.
They have a lot of electronics and the previous versions of these vehicles, the ice vehicles, internal combustion ones, contained relatively little silver.
Now we can see upwards of 2 ounces and you consider that we produce some hundred million ounces, vehicles, a year, and that's potentially a lot of silver in cars.
Of course, there are the smart grids. Again, more electronic components which you silver from everything from circuit boards to capacitors and so on and there is the smart devices using 5G. So all of that essentially means that silver demand looks pretty good and also for catalysts, also for chemical industry.
Silver is looking pretty good.
I would classify it as a critical metal that is going to be essential in the transformation to a net zero economy around the world, and we are not really investing significantlyin the primary or secondary sources of silver, and I think as we go forward, those deficits are going to a road above ground inventories and I think, over the long run, we could very well see silver materially above the $26 mark which we think about the very top of the cost curve which is probably one of the better performing metals. We often don't talk about silver when we talk about net zero, but I think it's important to note that silver is going to be increasingly a factor.
>> Alright, so some interesting near-term perhaps pressures but longer term some interesting ideas there for viewers to try to weigh off and do a little homework on. Let's take another question now. We talked off the top of the showabout the fed, higher interest rates.
A viewer wants to get your view on gold.
I've got 1923 an ounce on my screen here.
>> Yes.
I think… I have some bad news short run, I think. We could still friend below $1900 here. And again,the Federal Reserve is right intent on keeping interest rates higher for longer. We are not sure if they are going to go in September or October.
that will very much depend on what the data looks like, the CPI.
>> By go we mean go higher, right?
>> That's correct.
We sing, a TD Securities, that probably marches when they will start cutting. But that is by no means a guarantee. We are yet to see poor economic numbers.
We have been surprising to the upside across the board.
Employment has slumped a little bit but it is still problematic as far as the Fed's concern.
Unemployment is still very much near a 50 year low.
Wages are growing. The retail side of the consumer is showing strength, so the Fed is taking a very cautionary view here. I don't think Mr. Jerome Powell wants to be the one to let the inflation genie out of the bottle here and he is talking, I think, quite convincingly that he is already to do whatever he needs to do to keep inflation at bay and have it dropped to the 2% target.
So no big surprise that this is what we are hearing from the central bank, but we suspect that you're gonna get weakness later in the year into 2024 and that will most likely precipitate lower rates.
What does that mean? That if we do, in fact, go below 1900 bucks, at the end… >> Does it have people emboldened in betting against gold?
>> We have seen a lot of erosion in exposure, as you can see on the chart there. There are not a lot of speculative traders that have gone too long. However, we are seeing very strong demand from central banks.
Physical buyers, investors buying physical bars, not necessarily ETFs or contained in ETF, those bars, but those going, physical bars, we are seeing that strengthening as people worry, in China, for example, about the robustness of their currency.
We are noticing more strength, the premiums in China are strong and they have much more faith in gold in the Western markets do. So we like it.
$2100 late 23, early 24, is quite possible.
If you take the trading ranges, that's an average we are talking about. We could see something more than that. High debt, central bank buying, geopolitical risk, you know, considerable risk that some are seeing of monetization, massive government deficits and no real plan to pay for it has people confident that gold will do well and many investors are already starting to buy on the physical side. We are not really seeing it from these so-called sophisticated financial players but we think that comes as the Federal Reserve pivots at some point.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions.
we are going to get back to your questions for Bart Melek on commodities in just a moment time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.
com.
Now let's get to our educational segment of the day.
When you are looking to purchase an investment, there are two types of markets available to you: the primary and secondary markets. Here to explain the difference in how you get access to them on WebBroker isNugwa Haruna, Senior client education instructor with TD Direct Investing. Nugwa, always great to see you. Walk us through the primary and secondary markets.
Tell us how they are different and we will dig into how we can get into them on WebBroker.
>> Yeah, so when it comes to the opportunity to purchase securities, investors are presented as primary and secondary markets as opportunities. A lot of people may not be familiar with the primary market because that's wherewhen corporations and governments are looking to raise funds, they will seek out investors and they can do this by either offering a portion themselves so they will do that through stocks or they might actually borrow money from the public and that would be done through things like bonds.
And so when the securities are first issued, this is typically done through an IPO or an initial public offering.
Then, investors have an opportunity to become a part owner if you are buying socks, for instance, or become a creditor if you are purchasing bonds from these corporations or governments. On the other hand, we have the secondary market.
Most people will be familiar with this because when you go to purchase securities, for instance, in WebBroker, you are buying things on the secondary market. Just gonna shows real quick. Let's hop into WebBroker and I will show you an example of the secondary market.
Once in WebBroker, if I click on research and let's go to stocks, so once I am on a specific page, I will keep the stock I have on here right now. If I go to purchase this, Greg, I actually buy this from another investor.
I'm not buying the stock directly from Apple the corporation. You will see that over 17 million securities have traded today and this is happened between investors.
This is the stock market.
There is also a secondary market for things like bonds.
In WebBroker, if you click on research, underinvestment, if you go fixed income, this is where you will find I like to call them certified preowned bonds and when you buy these, you are also not buying these directly from the corporation, you are buying it from an investment dealer.
The money you put in these don't go directly to the corporation.
That's the fundamental difference between the primary and secondary markets.
> Okay, so now we understand. He said obviously people perhaps didn't even recognize that they are buying socks, they might be on the secondary market. Let's talk about the primary market, the one that we don't perhaps avail ourselves of a lot.
How to get access to it WebBroker?
>> Yeah, so, when it comes to accessing the primary market, you can do this in WebBroker, and I will show you how to find securities that are listed on the primary market.
So once in WebBroker, you're going to click on the tab that says trading, and once you do that, under the buy and sell tab, you're going to click new issues.
One thing I want to highlight is that not all new issues are IPOs or initial public offerings and that's because corporations and governments who already have some kind of security at there might be looking to raise more funds. When they are doing that, they may actually have new issues. So these are not initial public offerings. Also I want to mention that when you are looking at these, you will notice that they are Canadian-based and that is because the US and international markets, because of regulatory restrictions, don't do initial public offerings in Canada.
but if you do decide that you want to participate in the primary markets, you can do this, I'm just going to highlight the first one we have here.
You can dig deeper by simply clicking on that security there and you can pull up that prospectus, very important if you want to know exactly what you are investing in with the terms and conditions are.
But if you decide that you want to go ahead with this security, you someday want to highlight that security and then click place expression of interest. Now, I will mention that even though it's called an expression of interest, this is a firm offer to buy. Here, you'd be able to see what the minimum as well as maximum quantity you could purchase would be. It's not typically 5 million, but I'm just giving you an example.
You want to be aware though that when you do put in an offer, you might get a fulfilled, you might get a partial fill, you might actually get no fill at all so that's something to keep in mind because this is based on a first-come, first-served basis. One last thing I will highlight is that he was an investor may say well, I don't have the time to come in here every day to check out what is listed in new issues. Well, you can actually set up a notification to receive a notification anytime and you issue pops up.
It so to do that, you will simply click on update profile.
You want to add your email address and then, you are able to select the specific securities you want to get alerts about any time there is a new issue, you will update your profile and that way you will stay updated and you might have an opportunity to express interest.
>> Fashion except as always, Nugwa. Thanks for that.
Dashing for having me.
>> Nugwa Haruna, Senior client education instructor with TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Bart Melek, taking your questions about commodities. This one just coming in in the past couple of minutes. What's your medium and long term outlook on lithium and nickel commodities given their importance for EV production?
>> Well, I'm not going to give specific numbers because I'm not sure I can be 100% confident of, broadly speaking, short running, I think it's always difficult for lithium and nickel and mainly because there's a lot of volatility, demand is not particularly steady. We have seen lithium go up and down depending on the latest view on where batteries are going. The same thing has been happening with nickel. But I think beyond the short-term when we look into the medium outlook and long term, I think the outlook is quite good as the share of global vehicles sold tilts into EVs. And I think increasingly, we are going to be using these metals for these batteries, these battery systems, and I think, at some point, we are going to have to have a price that is high enough to incentivize mining and processing in North America because, right now, the vast majority of the processing is still in China.
There is no guarantee that they would be willing to give us all of the metal that we needed for this emerging industry.
So I think prices will have to go significantly higher to guarantee supplies and I'm very unspecific as to where that level is.
We really haven't done enough research to call that long term, but my feeling is that it's going to be significantly higher because you're going to need cash flows to incentivize the risky investment. Of course, there are risks that technology shifts more into hydrogen and others, so this isn't without risk either, but we are confident that these metals will do well.
>> This next question, sort of along the same vein, someone wants to know about the importance of platinum for metals for the auto industry.
>> That is a tricky one, and again, I'm being a little, you know, doing a little gymnastics here between the short and long run.
So platinum is a catalyst metal.
It's not only used in the jewelry industry but it is a very, very important at all for auto catalysts and that is part of the car that reduces noxious fumes and reduces pollution.
For a major run, there is a bit of a concern here that, as we move into EVs, which don't use oil based fuels, that you might need less metal because there might be less demand for auto catalysts because you are using EVs. We are not convinced that is actually going to happen. That is a concern some in the market have and we think that we are going to do both, we are going to do hybrids and EVs at the same time and as we move forward, there is going to be a convincing move toward hydrogen as well. That might take a little while, but platinum is an essential metal for hydrogen.
It is used on the one and to extract hydrogen from water, electrolysis, and that is also used in the fuel cells to extract or produce electricity given the input of hydrogen into the cells.
So I think the future is great. And on the investment side, we continue to have problems attracting investments. Africa, for example, is having current production issues.
Their electrical utility, Escom, is having problems where there is power interruption and we are not seeing as much metal as we would've expected because of these challenges. And going forward, there's no guaranteethat we are going to have sufficient metal to feed demand if the hydrogen part of the economy really takes off. But this is the more distant future and certainly there are risks associated with the metal at least in the short run. But some of the other ones, a broader slowdown in the global economy, as I said, it's a catalyst metal used in vehicles, if we do have a significant slowdown in economic activity, usually that means less motor vehicles being sold, that means less catalyst being used if you're producing less. So there are risks in the short run.
I think medium run as well. I think we are happier about the longer term.
>> Let's talk about the metal at the centre of electrification. Someone wants to get your outlook for copper and wondering if there any supply issues. If the future is electric and you need copper for that do we have the supply?
>> Well, look. If there is one metal that is going to be very hard to substitute from electrification, we have already talked about platinum, we've talked about silver, we've talked about lithium, we talked about nickel, you know, there are possible technological substitutions over the long run. Copper, I don't really see any of that. You are using a lot more copper per vehicle to run the little electrical motorsin these vehicles, the metal used for transformers, switches,any metal that you can imagine that will be needed to convert from AC to DC, to propel motors, to increase grades, it all takes a lot of copper across the entire complex. We do caution the market right now that because of the possible recession in the United States and slowdown in China and the rebound in production it could represent some challenges over the next couple of months. In fact, that's what we've been writing about. But we, again, I'm talking about the longer term, there is really nowhere near and naff investment to produce the amount of copper that will be needed in order to achieve let's say the Paris Accord targets and a net zero global economy even by 2050.
So copper probably going a lot higher.
Increasingly, the grids for the model are going down, meaning the new findings around the world are a lot poorer quality than they used to be, you get the easy stuff out first,they are looking in areas that are isolated without a lot of power grids or water, let's say somewhere in the Andes mountains, and you are going to need a higher price to create incentives to give revenuesto mining companies to invest in this.
And I think there is a growing sense of resource nationalism around the world where governments want… >> May be a bigger cut than they are getting right now.
>> A bigger cut than they are getting. And that means that will be less left for companies and let's face it, a company isn't investing in a multibillion-dollar project unless there are returns and so you might have to have even higher prices than what we were even mentioning down the road. Anything above 9 to 10,000, 12,000 to 10, I think is very feasible over the long run.
Significantly higher than what we have been used to.
But we have seen 10,000 copper and we haven't had critical shortages. So when we look forward, copper, to me, looks like one metal now probably will deliver on the promise of doing well.
>> Okay. We are going to get back to your questions for Bart Melek on commodities in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and a reminder that you can get touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.
com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Inflation continues to cool across the G-7 nations as the energy price surge from 2022 has faded.
However, the success central banks have had so far in tackling inflation, particularly core prices, is not shared equally across all nation. Our Anthony Okolie has been digging into a new report from TD Economics about it all and how the trends are going.
>> As you mentioned, TD Economics is that inflation pressures are heading down across advanced economies but getting price growth down and lined with target rates remains a challenge for most G-7 central banks.
When we look at just headline inflation, not core inflation, TD Economics is the some countries are standing a more than others, specifically Canada and the US stand out as some of the best performers, partly because with America never saw the same scale of inflation as the euro area and the UK did where in 2022 the Nat gas shock was the most profound. TD Economics also notes that in the euro area and UK, energy prices are still up significantly.
North American central banks have also made significant progress in tackling core inflation prices. In Canada, of course, we are just above3.4% year-over-year, the US is about 4.7%. It's also higher, slightly higher in the euro area. In the UK, it's running at roughly 8% year-over-year.
TD Economics also looked at the split between goods and services prices and how they differ across G7 nations and how they stack up. Price gains on the goods front eased in the EU, the UK, Canada and the USamid slowing demand and improving supply chain conditions. When it comes to services prices, they stripped that homeownership cost to make a dent.
The report looks at market implied inflation expectations and those of come down amid the central banksaggressive rate hiking over the past year.
But over the past few months, expectations have shifted higher because core inflation continues to remain sticky.
In contrast, however, consumer and business expectations for future inflation is trending lower across advanced economies, including here in Canada, the US and the euro area.
Finally, TD Economics looked at hourly wage growth across the G-7 nations, which still remains above pre-pandemic pace as job growth, or the job market remains fairly tight.
It is particularly high in the UK, where hourly wage growth hit a new post-pandemic I in me, running above 8% year-over-year, keeping pressure on the Bank of England to continue to aggressively tackle inflation.
>> That's G-7 in the West, obviously the world's second-largest economy, China, has not been able to restart its economy. What is TD Economics saying about that and what it could mean globally?
>> China's backdrop is notably different from the rest of the G-7 nations. Chinese consumer spending, factory production and investments in long-term assets like property or machinery all slumped last month and as Bart alluded to, youth unemployment has hit record highs in China while an ongoing real estate and debt crisis has investors fearing the worst. Last week, the Chinese government and surprised investors by not cutting an important interest rate that influences mortgages. China is extremely soft consumer price inflation is particularly concerning for the global economy.
The headline CPI slipped into deflationary territory in July while corporations firmed marginally to a still soft .8% year-over-year.
We can inflation pressures in China indicate tepid domestic demand and, of course, that could also mean less demand from China for goods from the US and Europe. TD Economics says that sustained weakness in China's economy will limit the potential for upside surprises in commodity prices. Great?
>> Alright. A nice guy and at the end there to what we are talking about today. Thanks, Anthony.
MoneyTalk's Anthony Okolie.
Let's get an update on the markets.
Okay, we're taking a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
This is the heat malfunction, and a picture of what's happening in the markets. We are screening by the TSX 60 by price and volume. You have a lot of green on the screen today.
You can choose the energy, financials or technology space.
Kinross popping over there on the side, up almost 4%.
In the material space, God acknowledged a bit of red on the screen. Alimentation Couche-Tard down about 1%.
South of the border, lessee was happening with the S&P 100.
It has been a bumpy August for equities. This is the last week.
Friday will be September.
He got some green on the screen here. Some tech players, looking at Mehta down in the corner up a little bit more than 1%. MMM reports are yet to be confirmed that they have perhaps reached a settlement in a lawsuit over some of their earplugs.
I own some of them as well.
You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with Bart Melek, global head quantity strategy at TD Securities. We are talking commodities.
Someone wants to talk about OPEC. OPEC+ seems to be aligning more closely with the BRICS nations. What does that mean for the commodity sector?
>> That's very good observation. We fully agree that it is happening.
There's a very good reason for that. When we look beyond 24, 25 and down the road, it is going to be the emerging market, China, India, I guess BRICS affiliated nations that will be responsible for much of demand growth, as we look to shifting very firmly into EVs, we are not going to, in the West, produce the growth that we used to in oil demand.
What does that mean?
Well, it probably means that OPEC+ behaves much less deferentially towards the United States and its allies and caters more to their other clients who will be the growth market. And that probably means that OPEC won't have a superpower like the United States having a lot of influence on their production decisions. Indeed, this is what we have seen recently where OPEC+ has cut and then Saudi Arabia has cut an additional million barrels per day, extended those cuts into September, if you recall, elevated the price from the 60s to now around $80 and brunt even higher without really an awful lot of concern about what the United States might want.
They did caution the US and maybe lectured it a little bit about selling off inventories which you probably wouldn't have seen 20 years ago where the Western world was the big client and they were a bit more geopolitically dependent on the United States. So I think there will be a shift that will be ongoing as time goes on.
>> Fashion conversation. As always, appreciate you being here. Look forward to next time.
>> It was my pleasure. I look forward to seeing you again.
> We will make sure it soon for the audience.
Our thanks to Bart Melek, global head quantity strategy that TD Securities.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show.
Jacky He, global consumer discretionary analyst with TD Asset Management will be our guest, taking your questions about consumer discretionary stocks.
A reminder that you can get this questions in ahead of time. Just email moneytalklive@td.
com.
That's all the time we have for the show today. Thanks for watching.
We will see you tomorrow.
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