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[music] >> Hello I'm an elk, welcome to MoneyTalk Live brought to you by TD Direct Investing. Every day I'll be joined by guests from across TD, many of them you'll only see here.
We will take you through its moving the markets and answer your questions about investing. Coming up on today's show.
We will discuss with China's economic weakness for the commodities space. Daniel Ghali, Senior Commodity Strategist at TD Securities as our guest. And in today's WebBroker education segment, Bryan Rogers will show us how you can research exchange traded funds using the platform. Here's how you can get in touch with us. Just email moneytalklive@td.com.
Or you can follow the viewer response box in the video player on WebBroker. Before we get to our guest of the day let's get you an update on the markets. Starting here at home with the TSX during a bit of a rough session yesterday for people along the markets.
A very modest again. Talking about a jump right now with the TSX Composite Index of 18 points. Just about 10th of a percent.
Among the most actively traded names right now in the TSX include Suncor. There is a little bit of downside action yesterday to say the least with some of the energy names of the falling price of crude but today a bit of a rebound. 3919. Suncor up a little more than 3%.
some of those names still off the lows a bit of the negative off just half a percent now. Now, south of the border we have an event coming up at 2 PM Eastern time today.
That would be the release of the Fed minutes. Investors looking for any sign that perhaps, will the Fed be on pause?
Are they done with rate hikes? Are they gonna parse those pretty carefully.
Ahead of that not a lot of action.
You can see right now the S&P 500 down a little shy of seven points. Not all that much. The tech heavy NASDAQ, fearing dance the broader market, a little more to the downside but still modest 1/3 of a percent.
We want to take a look at shares of target. They came out today, warning about inflation where consumers cutting back on their purchases. Slashing profit sales forecast for the year and here's the stock up 3%. Despite all of those warnings. They did manage to hand in a pretty hefty beat on the bottom line for their most recent quarters. They have some money moving toward that name. And that's a market update.
China is containing more stimulus may be on the way as its economy fails to live up to post lockdown expectations. Will that give a lift to the commodity space?
Joining us now to discuss, Daniel Ghali, Senior Commodity Strategist at TD Securities, great tag on the program.
> Thank you for having me.
>> Seems every day we get another weak economic data point out of China after all of the hype of the beginning of this year about how that reopening was going to fuel their appetite for everything. What's going on there?
>> It's funny.
Not only reopening that optimism but if we were to have this discussion a month ago, there was an immense amount with optimism surrounding the property sector. Obviously that hasn't panned out.
The situation is actually pretty dire.
If you look at the trade data came out earlier this week, exports down 14% imp imports down that tells you both external demand from China is declining and domestic demand is pretty bad.
The more concerning aspect to me is on the property sector side of the equation.
We have seen hopes that earlier in the year of the reopening was going to turn the property sector over the Chinese government bailing on a lot of their restrictions for property developers, financing. That Hope was perhaps warranted. But instead, what we've seen is right after the reopening, the property sector has started to slump again because this is concerning because the minute might be pointing to structural issues.
That might turn the economic problem into a liquidity problem.
> That's a pretty big issue obviously.
We did get a rate cut from China's Central Bank and then there were some reports today out-of-state media the government said we need to do something on the lines of stimulus but pretty vague.
What can China do at this point? That rake seems to completely overwhelm or I should say underwhelmed the market.
From a monetary policy perspective to the current C is at a fast pace.
The most important part was the omission of Pres.
she's houses for living not for speculating.
That raised the hopes that there was going to be a turnaround in property sector policies and we have seen some hints of what might be coming.
But overwhelmingly, this stimulus that saved the global economy in 2015 and 22,008.
That's the big question for markets. So far it doesn't look like it is the big stimulus that people are hoping for.
> We think about all the excitement earlier in the year about China's economic reopening.
And more recently as you said, the hopes for some sort of stimulus.
Was that more on the Western world than China? Did we start to sell ourselves some hype but what China can provide, yes I think our research suggests that the hype around the Chinese property sector and the Chinese stimulus overall has overwhelmingly been driven by the West.
We say that because in the aftermath of that July liberal meeting, we had the highest inflows into Chinese equities on record areas we also saw commodities with other industrial meadows rally sharply in our research suggested that those speculative flows were coming from the West where is our tracking of Chinese trade or position suggested that they were heavily offloading in the aftermath of the July meeting and that definitely raised some red flags >> Fascinating dynamic.
You mention inflows and commodities from the West. If this is the backdrop for China you don't know what they're gonna do when they are in a pretty tough place in terms of trying to get the economy turned around.
What does it mean for economies?
>> Obviously China is by far anything detrimental to Chinese economy is bad for downside of economies. The caveat however, we've seen the demand for commodities diverge since China reopening. Raw materials like copper and aluminum is etc.
, really driven by more international travel as you expect pent-up demand for travel in China was pretty significant during the lockdown an intern that is been driving a lot of the demand for the energy complex this year.
>> If we can't count on Chinese, it is nuanced right?
You have the domestic travel, the need for fuel, jet fuel but we can't count on them to be disabled for all these commodities, when we start thinking about?
>> A few things that we are thinking about in terms of risks.
The first, we touched upon earlier.
Is it China's property sector issues.
Morphing into a liquidity issue.
We say that because recently there have been some trust companies. The banking sector in China that have missed some payments.
The concern here is that shadow banks payment failures are going to seep into local government financing vehicles.
That concern is exacerbated by the fact that local governments typically finance themselves with land sales. Land sales are down 50% year on year.
At the demand side issue.
People don't want to buy more land.
They don't want to buy or build more projects.
The focus is on completing the projects that are already being in construction as opposed to the pipeline for future projects.
That is a big concern for local government financing.
>> Real challenges in China for their economy.
You laid out nicely for us. What's the upside potential for China?
What could go right?
>> Our economist you expect to fiscal package to be announced hopefully before September.
That should have the largest multiplier effect on Chinese economy as a whole.
But again, what is happening in China is bifurcation between the old sector industries and the new sector industries that the government actually does want to promote. So more likely than not, that fiscal stimulus is going to be start targeted to bolster consumption in the areas China actually wants to bolster consumption, namely new energy vehicles for example and that does happen in an application for commodities.
>> Always great insights with Daniel Ghali.
Getting the show started he will get your questions with Danial and just moments time.
A reminder that you can get in touch with us at any time by emailing MoneyTalkLive@td.com. Or fill out that viewer response box under the video player on WebBroker.
Right now let's get you update on some of the top world of top stories the world business.
Number of shovels breaking ground on new homes broke 10% from June to July.
Canada mortgage and Housing Corporation says housing starts for apartments and single detached homes did fall in the month.
TD Economics took a look at the numbers and said even with the monthly decline, the six month average for start does show that activity is still well above pre-pandemic levels.
The company behind discount retail banners such as marshals, winners and home sense reporting strong sales and profit growth for its most recent quarter. TJX Cos.
is reaping the benefits of inflation with consumers out looking for deals then it's also securing some premium merchandise from other retailers.
Looking to work on their inventory levels.
That stock up almost 5%.
A bit of a different story for US retailer target. Cutting its full-year sales and profit forecasts.
Consumers shift towards essentials away from bigger ticket discretionary items is weighing on sales.
Now that said, target managed to deliver pretty healthy earnings beat in its most recent quarter despite that sales softness of the stock right now is up a little more than 3%.
A quick check in on the markets.
Starting here at home on Bay Street with the TSX Composite Index.
Up a very modest 32 points a little shy the fifth of a percent. A bit of a rebound in the energy names.
South of the border, as investors await the last reading of what happened around the table. When the Fed decided to raise 25 basis points.
Of course back in July, that is history but we get the minutes. A little more insight. Investors want to know are they done? Were they near done? What comes next is another fed meeting of course next month in September.
Back now with Daniel Ghali taking your questions about commodities. Let's get to them.
Here's an interesting one.
We sing a potential supercycle and commodities ^...
¸we are talking about structural investment and spoke about this in the past as well.
Structural underinvestment of the supply side. That is playing out as you would expect in certain areas.
In other areas, namely the energy sector, we have seen some evidence of renewed investment which suggests a supercycle might be more delayed than what would otherwise be the case. So specifically, I'm talking about you know, significant investments in the Middle East and South America into offshore greenfield investments, new projects offshore.
The reason that that's concerning for the supercycle oil is that what you really need for supercycle to unfold as low spare capacity and decline in spare capacity.
What we've seen over the last year instead was an actual oversupply that was namely due to easing sanctions, enforcement on previously sanctioned barrels.
Venezuela, Russia, the more concerning aspect is that investment from those parts of the world are actually increasing in the structural underinvestment store is becoming more of a concern for the West specifically.
>> That's pretty fascinating.
There's a lot of focus on shared buybacks special dividends and returning money to shareholders.
Not so much of investments.
One of what about this country where there seeing a need to invest? Others will say the future is electric.
Your sunset industry.
>> I think the perception here is that the West namely Canadian oil sands is one example. The US shell patch which is one of the big drivers of production growth throughout the last decade.
Their production growth has capped.
So the perception here is that these countries can fill the gap that is being created by the structural underinvestment that we are seeing in the West. So the Middle East countries, Saudi Arabia, Iraq, Kuwait etc., they are trying to come in and fill that gap.
Interesting stuff.
We will get two precious metals now.
A viewer wants to know what the outlook is for gold? I have a feeling this might take us to central banks.
>> Absolutely.
You can talk about gold without talking about the Fed.
But gold is obviously under pressure over the last month. It is struggled for direction when you Zoom out a little bit in a longer term time horizon.
But there is a few things that are really important.
When were talking about the Fed, we have to talk with the labour market.
That's the main argument for no landing scenario which means no recession being expected.
It's actually, by the way, the fund manager industries mode scenario.
Most people single-handedly expect will happen to the US economy.
When I think about that, concern because the details of the data are actually far less positive than the data itself.
We are looking at the job market month after month.
It's boasting gains and sometimes those gains beat market expectations with the details of which sectors are actually fuelling those gains, you find out that it's primarily coming from the government.
Government jobs.
Healthcare and social assistance and private education.
That's actually not inconsistent with historical periods prior to recessions.
These are the sectors that typically are the latest to respond to slowing economic growth for obvious reasons.
And in turn, might continue to see job gains at a time when the economy is actually slowing.
So that some of the concerning aspect with respect to the strong labour market data that were seeing.
>> When I think about the role the gold plays The way I used understand gold is that money seeks a safe haven with gold.
As it is being overwhelmed by dental Bank policy right now? Interest rates? That's really the driver?
Definitely a large driver >> As much a driver for the US dollar which is the primary factor in gold. The same kind of fed forces.
But big picture here, gold does tend to ACT!
as a safe haven asset. It tends to do so because it's less correlated to the traditional markets. Stock indices and bonds, etc. That's why people tend to seek shelter in gold in times of turbulence.
Now, with that said, what we've seen in the equity markets is not the exact turbulence. There come off a little bit but we haven't seen any real signs of panic in any means.
>> We have a question here that sort of feeds off that we have been talking about.
If you're wanted to have some insights on the Fed's rate hiking cycle. How is it impacting commodities?
Here is something, what a pause on rate cut or rate cut if that's in the cards be a good thing for commodities?
>> Yeah absolutely and particularly for gold.
I would say when you look at the composition of investors for gold you have systematic traders. That section 1 of the big cohorts within the commodities investment space.
He also discretionary traders. These are folks that look at the Fed and things we've been discussing.
The discretionary traders are pretty much flat currently in gold.
They don't have neither large long position or large short position and what they're looking for, what we think they are looking for is evidence that rate cutting cycle is on the horizon over the next 12 months.
Historically, that's been really what it's taken for them to deploy their capital into gold.
>> I imagine this would be a part of the crowd this afternoon taking a pretty careful look at those minutes. minutes.
Fed minutes, do you put much weight? The market does move off of them.
>> Especially if you learn something new right? Sometimes the market is fully aware of what has been discussed with different Fed official speaking of. That's because their Communications have been really transparent over the last decade. But once in a while, you do get some new information that the market is moving.
>> I guess you'll find out in a little under two hours. As always at home make sure you do your own research before making any investment decisions.
We will get back to your questions with Daniel Ghali on commodities in just a moment's time.
You can get in touch of this any time by emailing moneytalklive@td.com.
Now let's get to our educational segment of the day.
There is a wide range of exchange traded funds available on WebBroker.
If you're looking to find specific types of funds, the platform does have tools which can help.
Bryan Rogers, Senior Client Education Instructor with TD Direct Investing joins us now is more.
>> All right. A popular question these days in our master class is how do I find particular funds in a certain category?
We hear people asking about index funds or will they be looking for dividend based funds? Fixed income?
Higher interest rates these days?
Asking me "what should I look for? How do I find an index fund or how do I find a certain type of fund and they are looking for me to give them an answer in a specific fund. I usually direct them towards WebBroker even if you have a particular ETF or mutual fund that someone is mentioned to you, you can look that up and that can actually be quantifying the full category doing your research from there.
Let me give you comparison and give you an idea what fund you might want to choose people I want to show you how to do that.
If you jump over the WebBroker.
You'll start with the research tab and click on ETF's.
You can see research you can do based on all kinds of category friends you have US stock, international stock, you want to do on a broad basis.
I scroll down on the left. You can see on a graph you can click on these checkmarks.
Some of these different top and bottom these will say the number of matches available there you can do a continued comparison from there you have a lot of stuff on this right-hand side as well.
A comparison you can do you can use these drop downs to look at today's ETF movers for both US and Canadian one I like, the most is down at the bottom, you can do and ETF quick screen. There is a larger screen that we have here you can do a quick screen.
You can go by ETF category family etc. If I say for example a category, if you had somebody looking for example fixed income, you get to it's all alphabetical. So you're scrolling down even a little further eventually you will get to let me see here, if I've got financial or fixed income. You will see bond funds.
Let's go a little further. Canadian fixed income balance, it's a little tricky to make sure to go through what exactly are looking for go through that list.
You will find a number of different categories.
If you click on the Canadian fixed income, it's telling me there's 42 different matches they could go view 42 matches.
Click on that. There is all the income ETF's if you know the symbol, to answer that question about index funding, if you another way to do this is to pull up a fund you know already and you can see, there is the category it's called "large blend" if you're looking for larger S&P 500 index ETF's, you can click on that link and it takes you to a page that has all the different ETF's that offer a similar offering that is going to be basically connected to a broad-based ETF.
So that being said, you can go even further and you can go into a larger screen.
If you go to research and screeners, we want time to go over that today but you can add a number of different criteria.
You can click on the ETF screener. From that point you can search for all kinds of other stuff.
You can search by category. You can search by the manager rant rather management expense ratio. A number of different criteria to add into a broader screen defining that is going to be perfect for your needs.
> Our thanks to Bryan Rogers, Senior Client Education Instructor TD Direct Investing.
Make sure to check out the learning centre on WebBroker for more educational videos live interactive master classes and upcoming webinars.
Now before we get back to questions about commodities for Daniel Ghali, a reminder that you can get in touch with us.
You have a question about investing or what's driving the markets?
Our guests are eager to do with what's on your mind 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 writing your question and hit send.
Losey at one of our guests can get you the answer right here at MoneyTalk Live.
Okay back with Daniel Ghali taking your questions about commodities. This one coming in the past couple of minutes he wants to know if it's better to buy gold ETF's are bullion. We can give you investing device but we can definitely talk about the difference here if you're biting a mining company, and ETF are a bully on.
I imagine a lot of commodities.
>> Definitely you know it's funny those different investment vehicles can actually generate very different return streams.
It's important to consider what exactly are investing in what exactly your thesis is in markets and how you want to express that.
I would say obviously I'm not an expert when it comes to gold miners but some of the things people tend to consider are things like the margins that are being earned by that corporate.
I would also say when it comes to considering ETF's, some of them might hold physical bully on's others might be trying to track another aspect of gold prices.
So it's important to know what you're investing in and why exactly that is the best vehicle to invest in.
>> Bully in itself I guess, people do hold it.
>> You can hold it and hold physical gold.
Some people tend to look at gold futures as a way to hold gold as well.
So there is definitely a variety of ways to express it and it's important to know what exactly, what return stream exactly your earning by holding that investment vehicle.
>> A great time for the viewer.
Maybe a little more homework on this space.
Another view here wants to get your take on silver.
>> Silver is, as always interesting.
I say that because of course, when you think about silver, and has both a precious metal component, an industrial metal component and is actually more of an industrial metal that it is a precious metal.
But the exciting part of silver story is coming from that industrial metal space actually.
Over the last few years, this proportion of demand associating with is rising. The exciting aspect here is the new solar cell technologies which should be using at least for the next few years a significantly higher amount of silver.
So given the trends in the renewable energy, solar cells in particular, the demand side aspect for silver is pretty exciting.
Meanwhile, there is actually very few pure play silver miners out there and that tells you that the elasticity of silver mining to prices is pretty low. So the supply side isn't looking too good as the demand side is starting to really wrap up.
That's an exciting story.
>> There is an upside potential based on the industrial demand.
Sometimes that industrial story could get overwhelmed by perhaps what's happening in the market and why investors might be moving around precious metals?
> Absolutely and this happens all the time. This is a story where the demand contribution is changing.
Historically the industrial fabrication is still about 56% of total silver demand but when you think about the year on year change there, the global economy does not move all that fast very often.
What does move his investor preferences.
That tends to be what drives the price of silver.
Now you have a story where you have a structural tailwind from the solar cell technology that should help silver prices through time.
>> Interesting.
Another question now.
If you are wants to get your take on platinum and radium.
>> PGM is.
Those of the smaller precious metals as well.
Typically they are used for admissions control and in both gasoline and diesel vehicles.
The story they are and I will talk particularly about platinum because the story there has been overwhelmingly about the supply side over the last year or year and 1/2.
Most platinum is mined in South Africa and as you know, South Africa has been going through significant challenges when it comes to their power production which is required of course to power in the minds that produce that. Metal.
So the interesting part here is that because, the shortage of power of South Africa has been so pronounced, there is been a regime shift in their power mark.
They're moving away from this single power provider framework and have allowed private power providers to emerge.
There is actually a huge amount of investment going into renewable power in South Africa.
A lot of it is actually contracted by the miners themselves.
So when you think a year out, that capacity might be coming to fruition and the miners power woes are probably going to a road. So the supply side isn't is great.
The demand side is starting to improve.
Of course, the focus on ESG across the world is rising and the demand for admission control materials is also rising.
There is also been some substitution away from Palladium.
Towards platinum. Towards platinum. supply story again, has been a major market driver over the last year.
>> Fascinating stuff and it takes us to a different cause.
It takes you around the world as to what's happening, commodities.
In different countries.
You mentioned controlling emissions.
If you are wants to know what part of the commodity sector might benefit the most from electric vehicle demands.
>> Always going back to the energy transition thing right?
That's part of the supercycle thesis that we spoke about earlier.
>> When we think about the energy transition, there's a few ways we see it going to impact commodities markets and markets broadly. The first is what we have called the game changer sectors right?
Those are sectors that immediately benefit.
The demand medially benefits from this transition.
Things like renewable power etc.
When we move a little bit further removed from that, is the greenish vacation commodities we have called them. So those are commodities that their demand is inextricably linked to the game changers.
Things like copper. You need more copper.
Those are some of the implications that are of course if were talking about more TVs, you're also talking about fewer internal combustion engines.
That's part of the negative demand story foil.
> I talk about that people are getting concerned about oil and this idea of a sunset industry.
I guess the question then becomes that we are moving towards this electrified, electrification everything in the future, how long of a life lined as well have?
Years, decades,?
>> I think when it comes to oil and petroleum products the interesting part here is that even if electrical vehicle sales across the world penetrate the market by 50%, one out of two vehicles sold by 2030 is an electric vehicle, those internal combustion engines are still on the road for a substantially longer period of time. So it takes a long time for demand to actually start falling.
And meanwhile, the industry in particular the West, again, is seeing that peak demand on the horizon and in turn is incentivized to not reinvest their free cash flow into their operations. So, that's what we are seeing supply, particularly in the West again starting to fall off of the Middle East seeing that and looking to potentially capitalize on the decreased demand from the West.
Increase supply for the West.
>> Back to your questions with Daniel Ghali and commodities in just a moment's time but as always make sure you do your own research before making any investment decisions.
A reminder you can get in touch with us at any time.
You have a question or about investing or one what's driving the markets?
Our guests are eager to hear it's on your mind so sinister 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 writing your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
^music¸ > We are having a look at TD's advance – dashboard for active traders.
This is the heat map function. It gives you a view of the market movers.
Right now we are taking a look at the TSX 60 by price and by volume. You see it's a bit of a mixed bag today.
Some of the energy names are standing out.
Suncor in particular SU. But also CBE, Genova's in the green solidly. Talking earlier about the fact that some pockets of weakness include, it's a mixed bag in the mining space.
You have Barrick Gold thereunder bit of pressure but First Quantum which would be FM to the upside. We will do a little tech.
Up on the top quarter you have Shopify feeling a bit of pressure today. Since its earnings were released a week and 1/2 ago it's been a bit of a choppy trade in that one.
Let's take a look at the S&P 100.
We are about an hour and 1/2 away now from getting those Fed minutes. You know investors are anticipating those.
Trying to figure out if they can get any more information on Daniela Singh earlier.
Can you learn something new about what the Fed was thinking around the table?
We know the outcome of that meeting that the rate hike that they gave us a 25 basis points what would that say on the path that?
A bit of weight on that front.
You do have some names moving off of news.
Including target.
We much the green patch on that screen.
Even though the warning of tough times ahead consumers tightening their belts and handling pretty substantial earnings in the latest quarter despite a softening of sales.
So having somebody moving toward the name.
You can find more information by visiting td.com/events dashboard.
Back knowledge Daniel Ghali from TD Securities taking your questions about commodities.
We've talked about oil, someone wants to know about OPEC and their partners are they still in control of the narrative around oil prices right now?
>> I mean I think both Saudi Arabia and Russia have basically prove that they are still in control of prices given the rally that we've seen over the last month.
But we spoke about this a little bit earlier.
They are not only in control of current prices right?
We can say that because most of the spare capacity that was unlocked over the last month, the production cuts that we have seen have come from those Nations. But also because of the investments that we spoke about. They see that the Western supply profile is tapering off and they are trying to cement their control over prices.
> Now, in the past, or in OPEC and their partners have made moves, this is the price of crude, the of butted heads of the White House.
The Biden administration wants to see lower prices.
It makes American voters happy and you know… It looks better on the administration.
Do you see much tension on that front going forward?
>> I think tensions have been rising between Middle East and the US for some time.
You have to think about the immense geopolitical ramifications coming from the oil market. Not only is the White House pressuring them to unlock some supply, they are also seeing a future where Western demand for their product is declining.
Most of the demand growth over the next 10 or 20 years is actually going to come from Asia.
Over the next five years that's China.
But beyond that, it's actually India that takes the helm to contribute most of the demand growth that we are going to see.
Meanwhile, Europe and North America demand for petroleum products is declining.
So that creates a change in incentives and I think that's the reason why tensions have been building.
>> Interesting stuff.
This question is about aluminum.
What's your outlook on this?
>> So we spokeansition.
Notice we did not speak much about aluminum. That was the fourth category.
Troublemaker categories. Those are sectors that are seeing their supply being proactively curtailed because they are polluted industries. So there is recently been a huge trend in terms of green aluminum.
That's the industry's response to this proactive curtailment.
But overwhelmingly what we've seen is because they are so energy intensive, their capacity is actually being curtailed on purpose. By governments.
That's a positive story in the longer run as well.
>> Okay, we talked a bit about throughout the show about how political climates in different countries does affect the commodities trade. A viewer wants to know what geopolitical issues you're most focused on right now?
>> A lot of hotspots these days but one that particularly comes to mind is the war in Ukraine.
Of course, since the war in Ukraine, energy prices have actually fallen as a result of the watered-down sanctions at the West imposed on Russian oil exports.
But, more recently concerns have risen that in the war, Russian oil tankers make it hit.
Constraining, you know, the ability of other countries to buy Russian oil. That would be a significant supply shock and would contribute significantly to supply risk in the market.
Obviously the West doesn't want that to happen.
But of course in war you never know.
> Here is an interesting one. Just came in right now. I think we can go for on-the-fly. We talked with the fact if you actually started interest-rate hawser cuts, the viewer wants to know if you got higher interest rates, did they favour any commodities over any others?
>> Higher interest rates are historically not the positive for commodity markets. So they constrained the demand. They also create a higher opportunity cost for holding those commodities. Gold comes to mind.
The cost on gold right now is pretty significant and it's one of the reasons why discretionary traders are avoiding it for now.
What you need to see again is the likelihood of a rate cutting cycle starting before people are willing to pay that cost to hold commodity.
>> Okay. Good insight on that one.
Before we let you go I want to circle back to the top. We talked about China and how every day I think of the newspaper but in truth I'm actually looking at my phone.
Eating graphics getting headlines.
What are you waiting to see out of them and what's it mean for commodities?
>> Most importantly we need to see some stability station in the property sector.
Again, the concern there is that we are in a downward spiral where weakening demand is hard to stimulate because most of the demand over the last decade has actually been speculative in nature.
China's real estate sector is heavily ingrained into the culture.
It has ramifications for China's long-term success because official officials see it as one of the reasons why the birth rate has declined significantly since it's so expensive to buy a home.
So this is really a sector that is important to watch and has really big ramifications for global markets.
>> Great insights as always Danial. Really enjoyed and looking forward to our next chat.
>> Thanks.
>> Thanks very much.
>> Our thanks to Daniel Ghali of TD Securities. Stay tuned for tomorrow's show, Rishi Sondhi will be our guest taking your questions. We have numbers on national wholesales the other day.
Lots to talk about with him and lots to ask him about as well.
Let's get those questions in ahead of time. Email moneytalklive@td.com.
com. com.
Thanks for watching and we will see you tomorrow.
[music]
[music] >> Hello I'm an elk, welcome to MoneyTalk Live brought to you by TD Direct Investing. Every day I'll be joined by guests from across TD, many of them you'll only see here.
We will take you through its moving the markets and answer your questions about investing. Coming up on today's show.
We will discuss with China's economic weakness for the commodities space. Daniel Ghali, Senior Commodity Strategist at TD Securities as our guest. And in today's WebBroker education segment, Bryan Rogers will show us how you can research exchange traded funds using the platform. Here's how you can get in touch with us. Just email moneytalklive@td.com.
Or you can follow the viewer response box in the video player on WebBroker. Before we get to our guest of the day let's get you an update on the markets. Starting here at home with the TSX during a bit of a rough session yesterday for people along the markets.
A very modest again. Talking about a jump right now with the TSX Composite Index of 18 points. Just about 10th of a percent.
Among the most actively traded names right now in the TSX include Suncor. There is a little bit of downside action yesterday to say the least with some of the energy names of the falling price of crude but today a bit of a rebound. 3919. Suncor up a little more than 3%.
some of those names still off the lows a bit of the negative off just half a percent now. Now, south of the border we have an event coming up at 2 PM Eastern time today.
That would be the release of the Fed minutes. Investors looking for any sign that perhaps, will the Fed be on pause?
Are they done with rate hikes? Are they gonna parse those pretty carefully.
Ahead of that not a lot of action.
You can see right now the S&P 500 down a little shy of seven points. Not all that much. The tech heavy NASDAQ, fearing dance the broader market, a little more to the downside but still modest 1/3 of a percent.
We want to take a look at shares of target. They came out today, warning about inflation where consumers cutting back on their purchases. Slashing profit sales forecast for the year and here's the stock up 3%. Despite all of those warnings. They did manage to hand in a pretty hefty beat on the bottom line for their most recent quarters. They have some money moving toward that name. And that's a market update.
China is containing more stimulus may be on the way as its economy fails to live up to post lockdown expectations. Will that give a lift to the commodity space?
Joining us now to discuss, Daniel Ghali, Senior Commodity Strategist at TD Securities, great tag on the program.
> Thank you for having me.
>> Seems every day we get another weak economic data point out of China after all of the hype of the beginning of this year about how that reopening was going to fuel their appetite for everything. What's going on there?
>> It's funny.
Not only reopening that optimism but if we were to have this discussion a month ago, there was an immense amount with optimism surrounding the property sector. Obviously that hasn't panned out.
The situation is actually pretty dire.
If you look at the trade data came out earlier this week, exports down 14% imp imports down that tells you both external demand from China is declining and domestic demand is pretty bad.
The more concerning aspect to me is on the property sector side of the equation.
We have seen hopes that earlier in the year of the reopening was going to turn the property sector over the Chinese government bailing on a lot of their restrictions for property developers, financing. That Hope was perhaps warranted. But instead, what we've seen is right after the reopening, the property sector has started to slump again because this is concerning because the minute might be pointing to structural issues.
That might turn the economic problem into a liquidity problem.
> That's a pretty big issue obviously.
We did get a rate cut from China's Central Bank and then there were some reports today out-of-state media the government said we need to do something on the lines of stimulus but pretty vague.
What can China do at this point? That rake seems to completely overwhelm or I should say underwhelmed the market.
From a monetary policy perspective to the current C is at a fast pace.
The most important part was the omission of Pres.
she's houses for living not for speculating.
That raised the hopes that there was going to be a turnaround in property sector policies and we have seen some hints of what might be coming.
But overwhelmingly, this stimulus that saved the global economy in 2015 and 22,008.
That's the big question for markets. So far it doesn't look like it is the big stimulus that people are hoping for.
> We think about all the excitement earlier in the year about China's economic reopening.
And more recently as you said, the hopes for some sort of stimulus.
Was that more on the Western world than China? Did we start to sell ourselves some hype but what China can provide, yes I think our research suggests that the hype around the Chinese property sector and the Chinese stimulus overall has overwhelmingly been driven by the West.
We say that because in the aftermath of that July liberal meeting, we had the highest inflows into Chinese equities on record areas we also saw commodities with other industrial meadows rally sharply in our research suggested that those speculative flows were coming from the West where is our tracking of Chinese trade or position suggested that they were heavily offloading in the aftermath of the July meeting and that definitely raised some red flags >> Fascinating dynamic.
You mention inflows and commodities from the West. If this is the backdrop for China you don't know what they're gonna do when they are in a pretty tough place in terms of trying to get the economy turned around.
What does it mean for economies?
>> Obviously China is by far anything detrimental to Chinese economy is bad for downside of economies. The caveat however, we've seen the demand for commodities diverge since China reopening. Raw materials like copper and aluminum is etc.
, really driven by more international travel as you expect pent-up demand for travel in China was pretty significant during the lockdown an intern that is been driving a lot of the demand for the energy complex this year.
>> If we can't count on Chinese, it is nuanced right?
You have the domestic travel, the need for fuel, jet fuel but we can't count on them to be disabled for all these commodities, when we start thinking about?
>> A few things that we are thinking about in terms of risks.
The first, we touched upon earlier.
Is it China's property sector issues.
Morphing into a liquidity issue.
We say that because recently there have been some trust companies. The banking sector in China that have missed some payments.
The concern here is that shadow banks payment failures are going to seep into local government financing vehicles.
That concern is exacerbated by the fact that local governments typically finance themselves with land sales. Land sales are down 50% year on year.
At the demand side issue.
People don't want to buy more land.
They don't want to buy or build more projects.
The focus is on completing the projects that are already being in construction as opposed to the pipeline for future projects.
That is a big concern for local government financing.
>> Real challenges in China for their economy.
You laid out nicely for us. What's the upside potential for China?
What could go right?
>> Our economist you expect to fiscal package to be announced hopefully before September.
That should have the largest multiplier effect on Chinese economy as a whole.
But again, what is happening in China is bifurcation between the old sector industries and the new sector industries that the government actually does want to promote. So more likely than not, that fiscal stimulus is going to be start targeted to bolster consumption in the areas China actually wants to bolster consumption, namely new energy vehicles for example and that does happen in an application for commodities.
>> Always great insights with Daniel Ghali.
Getting the show started he will get your questions with Danial and just moments time.
A reminder that you can get in touch with us at any time by emailing MoneyTalkLive@td.com. Or fill out that viewer response box under the video player on WebBroker.
Right now let's get you update on some of the top world of top stories the world business.
Number of shovels breaking ground on new homes broke 10% from June to July.
Canada mortgage and Housing Corporation says housing starts for apartments and single detached homes did fall in the month.
TD Economics took a look at the numbers and said even with the monthly decline, the six month average for start does show that activity is still well above pre-pandemic levels.
The company behind discount retail banners such as marshals, winners and home sense reporting strong sales and profit growth for its most recent quarter. TJX Cos.
is reaping the benefits of inflation with consumers out looking for deals then it's also securing some premium merchandise from other retailers.
Looking to work on their inventory levels.
That stock up almost 5%.
A bit of a different story for US retailer target. Cutting its full-year sales and profit forecasts.
Consumers shift towards essentials away from bigger ticket discretionary items is weighing on sales.
Now that said, target managed to deliver pretty healthy earnings beat in its most recent quarter despite that sales softness of the stock right now is up a little more than 3%.
A quick check in on the markets.
Starting here at home on Bay Street with the TSX Composite Index.
Up a very modest 32 points a little shy the fifth of a percent. A bit of a rebound in the energy names.
South of the border, as investors await the last reading of what happened around the table. When the Fed decided to raise 25 basis points.
Of course back in July, that is history but we get the minutes. A little more insight. Investors want to know are they done? Were they near done? What comes next is another fed meeting of course next month in September.
Back now with Daniel Ghali taking your questions about commodities. Let's get to them.
Here's an interesting one.
We sing a potential supercycle and commodities ^...
¸we are talking about structural investment and spoke about this in the past as well.
Structural underinvestment of the supply side. That is playing out as you would expect in certain areas.
In other areas, namely the energy sector, we have seen some evidence of renewed investment which suggests a supercycle might be more delayed than what would otherwise be the case. So specifically, I'm talking about you know, significant investments in the Middle East and South America into offshore greenfield investments, new projects offshore.
The reason that that's concerning for the supercycle oil is that what you really need for supercycle to unfold as low spare capacity and decline in spare capacity.
What we've seen over the last year instead was an actual oversupply that was namely due to easing sanctions, enforcement on previously sanctioned barrels.
Venezuela, Russia, the more concerning aspect is that investment from those parts of the world are actually increasing in the structural underinvestment store is becoming more of a concern for the West specifically.
>> That's pretty fascinating.
There's a lot of focus on shared buybacks special dividends and returning money to shareholders.
Not so much of investments.
One of what about this country where there seeing a need to invest? Others will say the future is electric.
Your sunset industry.
>> I think the perception here is that the West namely Canadian oil sands is one example. The US shell patch which is one of the big drivers of production growth throughout the last decade.
Their production growth has capped.
So the perception here is that these countries can fill the gap that is being created by the structural underinvestment that we are seeing in the West. So the Middle East countries, Saudi Arabia, Iraq, Kuwait etc., they are trying to come in and fill that gap.
Interesting stuff.
We will get two precious metals now.
A viewer wants to know what the outlook is for gold? I have a feeling this might take us to central banks.
>> Absolutely.
You can talk about gold without talking about the Fed.
But gold is obviously under pressure over the last month. It is struggled for direction when you Zoom out a little bit in a longer term time horizon.
But there is a few things that are really important.
When were talking about the Fed, we have to talk with the labour market.
That's the main argument for no landing scenario which means no recession being expected.
It's actually, by the way, the fund manager industries mode scenario.
Most people single-handedly expect will happen to the US economy.
When I think about that, concern because the details of the data are actually far less positive than the data itself.
We are looking at the job market month after month.
It's boasting gains and sometimes those gains beat market expectations with the details of which sectors are actually fuelling those gains, you find out that it's primarily coming from the government.
Government jobs.
Healthcare and social assistance and private education.
That's actually not inconsistent with historical periods prior to recessions.
These are the sectors that typically are the latest to respond to slowing economic growth for obvious reasons.
And in turn, might continue to see job gains at a time when the economy is actually slowing.
So that some of the concerning aspect with respect to the strong labour market data that were seeing.
>> When I think about the role the gold plays The way I used understand gold is that money seeks a safe haven with gold.
As it is being overwhelmed by dental Bank policy right now? Interest rates? That's really the driver?
Definitely a large driver >> As much a driver for the US dollar which is the primary factor in gold. The same kind of fed forces.
But big picture here, gold does tend to ACT!
as a safe haven asset. It tends to do so because it's less correlated to the traditional markets. Stock indices and bonds, etc. That's why people tend to seek shelter in gold in times of turbulence.
Now, with that said, what we've seen in the equity markets is not the exact turbulence. There come off a little bit but we haven't seen any real signs of panic in any means.
>> We have a question here that sort of feeds off that we have been talking about.
If you're wanted to have some insights on the Fed's rate hiking cycle. How is it impacting commodities?
Here is something, what a pause on rate cut or rate cut if that's in the cards be a good thing for commodities?
>> Yeah absolutely and particularly for gold.
I would say when you look at the composition of investors for gold you have systematic traders. That section 1 of the big cohorts within the commodities investment space.
He also discretionary traders. These are folks that look at the Fed and things we've been discussing.
The discretionary traders are pretty much flat currently in gold.
They don't have neither large long position or large short position and what they're looking for, what we think they are looking for is evidence that rate cutting cycle is on the horizon over the next 12 months.
Historically, that's been really what it's taken for them to deploy their capital into gold.
>> I imagine this would be a part of the crowd this afternoon taking a pretty careful look at those minutes. minutes.
Fed minutes, do you put much weight? The market does move off of them.
>> Especially if you learn something new right? Sometimes the market is fully aware of what has been discussed with different Fed official speaking of. That's because their Communications have been really transparent over the last decade. But once in a while, you do get some new information that the market is moving.
>> I guess you'll find out in a little under two hours. As always at home make sure you do your own research before making any investment decisions.
We will get back to your questions with Daniel Ghali on commodities in just a moment's time.
You can get in touch of this any time by emailing moneytalklive@td.com.
Now let's get to our educational segment of the day.
There is a wide range of exchange traded funds available on WebBroker.
If you're looking to find specific types of funds, the platform does have tools which can help.
Bryan Rogers, Senior Client Education Instructor with TD Direct Investing joins us now is more.
>> All right. A popular question these days in our master class is how do I find particular funds in a certain category?
We hear people asking about index funds or will they be looking for dividend based funds? Fixed income?
Higher interest rates these days?
Asking me "what should I look for? How do I find an index fund or how do I find a certain type of fund and they are looking for me to give them an answer in a specific fund. I usually direct them towards WebBroker even if you have a particular ETF or mutual fund that someone is mentioned to you, you can look that up and that can actually be quantifying the full category doing your research from there.
Let me give you comparison and give you an idea what fund you might want to choose people I want to show you how to do that.
If you jump over the WebBroker.
You'll start with the research tab and click on ETF's.
You can see research you can do based on all kinds of category friends you have US stock, international stock, you want to do on a broad basis.
I scroll down on the left. You can see on a graph you can click on these checkmarks.
Some of these different top and bottom these will say the number of matches available there you can do a continued comparison from there you have a lot of stuff on this right-hand side as well.
A comparison you can do you can use these drop downs to look at today's ETF movers for both US and Canadian one I like, the most is down at the bottom, you can do and ETF quick screen. There is a larger screen that we have here you can do a quick screen.
You can go by ETF category family etc. If I say for example a category, if you had somebody looking for example fixed income, you get to it's all alphabetical. So you're scrolling down even a little further eventually you will get to let me see here, if I've got financial or fixed income. You will see bond funds.
Let's go a little further. Canadian fixed income balance, it's a little tricky to make sure to go through what exactly are looking for go through that list.
You will find a number of different categories.
If you click on the Canadian fixed income, it's telling me there's 42 different matches they could go view 42 matches.
Click on that. There is all the income ETF's if you know the symbol, to answer that question about index funding, if you another way to do this is to pull up a fund you know already and you can see, there is the category it's called "large blend" if you're looking for larger S&P 500 index ETF's, you can click on that link and it takes you to a page that has all the different ETF's that offer a similar offering that is going to be basically connected to a broad-based ETF.
So that being said, you can go even further and you can go into a larger screen.
If you go to research and screeners, we want time to go over that today but you can add a number of different criteria.
You can click on the ETF screener. From that point you can search for all kinds of other stuff.
You can search by category. You can search by the manager rant rather management expense ratio. A number of different criteria to add into a broader screen defining that is going to be perfect for your needs.
> Our thanks to Bryan Rogers, Senior Client Education Instructor TD Direct Investing.
Make sure to check out the learning centre on WebBroker for more educational videos live interactive master classes and upcoming webinars.
Now before we get back to questions about commodities for Daniel Ghali, a reminder that you can get in touch with us.
You have a question about investing or what's driving the markets?
Our guests are eager to do with what's on your mind 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 writing your question and hit send.
Losey at one of our guests can get you the answer right here at MoneyTalk Live.
Okay back with Daniel Ghali taking your questions about commodities. This one coming in the past couple of minutes he wants to know if it's better to buy gold ETF's are bullion. We can give you investing device but we can definitely talk about the difference here if you're biting a mining company, and ETF are a bully on.
I imagine a lot of commodities.
>> Definitely you know it's funny those different investment vehicles can actually generate very different return streams.
It's important to consider what exactly are investing in what exactly your thesis is in markets and how you want to express that.
I would say obviously I'm not an expert when it comes to gold miners but some of the things people tend to consider are things like the margins that are being earned by that corporate.
I would also say when it comes to considering ETF's, some of them might hold physical bully on's others might be trying to track another aspect of gold prices.
So it's important to know what you're investing in and why exactly that is the best vehicle to invest in.
>> Bully in itself I guess, people do hold it.
>> You can hold it and hold physical gold.
Some people tend to look at gold futures as a way to hold gold as well.
So there is definitely a variety of ways to express it and it's important to know what exactly, what return stream exactly your earning by holding that investment vehicle.
>> A great time for the viewer.
Maybe a little more homework on this space.
Another view here wants to get your take on silver.
>> Silver is, as always interesting.
I say that because of course, when you think about silver, and has both a precious metal component, an industrial metal component and is actually more of an industrial metal that it is a precious metal.
But the exciting part of silver story is coming from that industrial metal space actually.
Over the last few years, this proportion of demand associating with is rising. The exciting aspect here is the new solar cell technologies which should be using at least for the next few years a significantly higher amount of silver.
So given the trends in the renewable energy, solar cells in particular, the demand side aspect for silver is pretty exciting.
Meanwhile, there is actually very few pure play silver miners out there and that tells you that the elasticity of silver mining to prices is pretty low. So the supply side isn't looking too good as the demand side is starting to really wrap up.
That's an exciting story.
>> There is an upside potential based on the industrial demand.
Sometimes that industrial story could get overwhelmed by perhaps what's happening in the market and why investors might be moving around precious metals?
> Absolutely and this happens all the time. This is a story where the demand contribution is changing.
Historically the industrial fabrication is still about 56% of total silver demand but when you think about the year on year change there, the global economy does not move all that fast very often.
What does move his investor preferences.
That tends to be what drives the price of silver.
Now you have a story where you have a structural tailwind from the solar cell technology that should help silver prices through time.
>> Interesting.
Another question now.
If you are wants to get your take on platinum and radium.
>> PGM is.
Those of the smaller precious metals as well.
Typically they are used for admissions control and in both gasoline and diesel vehicles.
The story they are and I will talk particularly about platinum because the story there has been overwhelmingly about the supply side over the last year or year and 1/2.
Most platinum is mined in South Africa and as you know, South Africa has been going through significant challenges when it comes to their power production which is required of course to power in the minds that produce that. Metal.
So the interesting part here is that because, the shortage of power of South Africa has been so pronounced, there is been a regime shift in their power mark.
They're moving away from this single power provider framework and have allowed private power providers to emerge.
There is actually a huge amount of investment going into renewable power in South Africa.
A lot of it is actually contracted by the miners themselves.
So when you think a year out, that capacity might be coming to fruition and the miners power woes are probably going to a road. So the supply side isn't is great.
The demand side is starting to improve.
Of course, the focus on ESG across the world is rising and the demand for admission control materials is also rising.
There is also been some substitution away from Palladium.
Towards platinum. Towards platinum. supply story again, has been a major market driver over the last year.
>> Fascinating stuff and it takes us to a different cause.
It takes you around the world as to what's happening, commodities.
In different countries.
You mentioned controlling emissions.
If you are wants to know what part of the commodity sector might benefit the most from electric vehicle demands.
>> Always going back to the energy transition thing right?
That's part of the supercycle thesis that we spoke about earlier.
>> When we think about the energy transition, there's a few ways we see it going to impact commodities markets and markets broadly. The first is what we have called the game changer sectors right?
Those are sectors that immediately benefit.
The demand medially benefits from this transition.
Things like renewable power etc.
When we move a little bit further removed from that, is the greenish vacation commodities we have called them. So those are commodities that their demand is inextricably linked to the game changers.
Things like copper. You need more copper.
Those are some of the implications that are of course if were talking about more TVs, you're also talking about fewer internal combustion engines.
That's part of the negative demand story foil.
> I talk about that people are getting concerned about oil and this idea of a sunset industry.
I guess the question then becomes that we are moving towards this electrified, electrification everything in the future, how long of a life lined as well have?
Years, decades,?
>> I think when it comes to oil and petroleum products the interesting part here is that even if electrical vehicle sales across the world penetrate the market by 50%, one out of two vehicles sold by 2030 is an electric vehicle, those internal combustion engines are still on the road for a substantially longer period of time. So it takes a long time for demand to actually start falling.
And meanwhile, the industry in particular the West, again, is seeing that peak demand on the horizon and in turn is incentivized to not reinvest their free cash flow into their operations. So, that's what we are seeing supply, particularly in the West again starting to fall off of the Middle East seeing that and looking to potentially capitalize on the decreased demand from the West.
Increase supply for the West.
>> Back to your questions with Daniel Ghali and commodities in just a moment's time but as always make sure you do your own research before making any investment decisions.
A reminder you can get in touch with us at any time.
You have a question or about investing or one what's driving the markets?
Our guests are eager to hear it's on your mind so sinister 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 writing your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
^music¸ > We are having a look at TD's advance – dashboard for active traders.
This is the heat map function. It gives you a view of the market movers.
Right now we are taking a look at the TSX 60 by price and by volume. You see it's a bit of a mixed bag today.
Some of the energy names are standing out.
Suncor in particular SU. But also CBE, Genova's in the green solidly. Talking earlier about the fact that some pockets of weakness include, it's a mixed bag in the mining space.
You have Barrick Gold thereunder bit of pressure but First Quantum which would be FM to the upside. We will do a little tech.
Up on the top quarter you have Shopify feeling a bit of pressure today. Since its earnings were released a week and 1/2 ago it's been a bit of a choppy trade in that one.
Let's take a look at the S&P 100.
We are about an hour and 1/2 away now from getting those Fed minutes. You know investors are anticipating those.
Trying to figure out if they can get any more information on Daniela Singh earlier.
Can you learn something new about what the Fed was thinking around the table?
We know the outcome of that meeting that the rate hike that they gave us a 25 basis points what would that say on the path that?
A bit of weight on that front.
You do have some names moving off of news.
Including target.
We much the green patch on that screen.
Even though the warning of tough times ahead consumers tightening their belts and handling pretty substantial earnings in the latest quarter despite a softening of sales.
So having somebody moving toward the name.
You can find more information by visiting td.com/events dashboard.
Back knowledge Daniel Ghali from TD Securities taking your questions about commodities.
We've talked about oil, someone wants to know about OPEC and their partners are they still in control of the narrative around oil prices right now?
>> I mean I think both Saudi Arabia and Russia have basically prove that they are still in control of prices given the rally that we've seen over the last month.
But we spoke about this a little bit earlier.
They are not only in control of current prices right?
We can say that because most of the spare capacity that was unlocked over the last month, the production cuts that we have seen have come from those Nations. But also because of the investments that we spoke about. They see that the Western supply profile is tapering off and they are trying to cement their control over prices.
> Now, in the past, or in OPEC and their partners have made moves, this is the price of crude, the of butted heads of the White House.
The Biden administration wants to see lower prices.
It makes American voters happy and you know… It looks better on the administration.
Do you see much tension on that front going forward?
>> I think tensions have been rising between Middle East and the US for some time.
You have to think about the immense geopolitical ramifications coming from the oil market. Not only is the White House pressuring them to unlock some supply, they are also seeing a future where Western demand for their product is declining.
Most of the demand growth over the next 10 or 20 years is actually going to come from Asia.
Over the next five years that's China.
But beyond that, it's actually India that takes the helm to contribute most of the demand growth that we are going to see.
Meanwhile, Europe and North America demand for petroleum products is declining.
So that creates a change in incentives and I think that's the reason why tensions have been building.
>> Interesting stuff.
This question is about aluminum.
What's your outlook on this?
>> So we spokeansition.
Notice we did not speak much about aluminum. That was the fourth category.
Troublemaker categories. Those are sectors that are seeing their supply being proactively curtailed because they are polluted industries. So there is recently been a huge trend in terms of green aluminum.
That's the industry's response to this proactive curtailment.
But overwhelmingly what we've seen is because they are so energy intensive, their capacity is actually being curtailed on purpose. By governments.
That's a positive story in the longer run as well.
>> Okay, we talked a bit about throughout the show about how political climates in different countries does affect the commodities trade. A viewer wants to know what geopolitical issues you're most focused on right now?
>> A lot of hotspots these days but one that particularly comes to mind is the war in Ukraine.
Of course, since the war in Ukraine, energy prices have actually fallen as a result of the watered-down sanctions at the West imposed on Russian oil exports.
But, more recently concerns have risen that in the war, Russian oil tankers make it hit.
Constraining, you know, the ability of other countries to buy Russian oil. That would be a significant supply shock and would contribute significantly to supply risk in the market.
Obviously the West doesn't want that to happen.
But of course in war you never know.
> Here is an interesting one. Just came in right now. I think we can go for on-the-fly. We talked with the fact if you actually started interest-rate hawser cuts, the viewer wants to know if you got higher interest rates, did they favour any commodities over any others?
>> Higher interest rates are historically not the positive for commodity markets. So they constrained the demand. They also create a higher opportunity cost for holding those commodities. Gold comes to mind.
The cost on gold right now is pretty significant and it's one of the reasons why discretionary traders are avoiding it for now.
What you need to see again is the likelihood of a rate cutting cycle starting before people are willing to pay that cost to hold commodity.
>> Okay. Good insight on that one.
Before we let you go I want to circle back to the top. We talked about China and how every day I think of the newspaper but in truth I'm actually looking at my phone.
Eating graphics getting headlines.
What are you waiting to see out of them and what's it mean for commodities?
>> Most importantly we need to see some stability station in the property sector.
Again, the concern there is that we are in a downward spiral where weakening demand is hard to stimulate because most of the demand over the last decade has actually been speculative in nature.
China's real estate sector is heavily ingrained into the culture.
It has ramifications for China's long-term success because official officials see it as one of the reasons why the birth rate has declined significantly since it's so expensive to buy a home.
So this is really a sector that is important to watch and has really big ramifications for global markets.
>> Great insights as always Danial. Really enjoyed and looking forward to our next chat.
>> Thanks.
>> Thanks very much.
>> Our thanks to Daniel Ghali of TD Securities. Stay tuned for tomorrow's show, Rishi Sondhi will be our guest taking your questions. We have numbers on national wholesales the other day.
Lots to talk about with him and lots to ask him about as well.
Let's get those questions in ahead of time. Email moneytalklive@td.com.
com. com.
Thanks for watching and we will see you tomorrow.
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