Oil trades below US$46/bbl, and it's only going lower: portfolio manager
This week’s five per cent slump in oil prices has Canadian investors wondering if it’s time to dump their oil and gas stocks until the storm passes – BNN brings you the pros and cons today.
“We think a lot of the energy stocks are going to look like value traps,” Caldwell Investment Management’s James Thorne told us on Market Call yesterday. He made the case for getting out of the sector now, asking “why would you sit there and wait?”
The slump in oil has helped to drag the Canadian below 73 cents U.S. At 10:10 a.m. ET, we’ll hear from a currency watcher who thinks loonie trackers may be paying attention to the wrong oil price. Josh Crumb, chief strategy officer at GoldMoney (XAU.TO), reckons that five-year oil futures are a better signpost for the level of the local dollar than spot crude. The Globe and Mail’s Scott Barlow said this week that by this yardstick, “the loonie is overvalued relative to bonds and fair value in terms of oil.”
At 11 a.m. ET on Commodities, Macquarie analyst Michael Gray will suggest buying miners such as Richmont Mines (RIC.TO), Integra Gold (ICG.V), Detour Gold (DGC.TO), Kirkland Lake (KL.TO) and Alamos Gold Inc (AGI.TO) that have operations in Canada, which means a lower currency brings down their cost base.
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Meanwhile, Canada's employment data disappointed last month.
After months of impressive gains the Canadian economy added 3,200 jobs in April - well below expectations. And most of the job gains were in part time positions - not full-time as in previous reports.
Protectionist pronouncements from President Donald Trump and other U.S. politicians may also have cast a shadow over the Canadian dollar.
Now Ontario Premier Kathleen Wynne is said to be planning a “Buy Canadian” measure to hit back at any state that brings in Buy American rules, according to a report in The Globe and Mail. That’s after New York State Governor Andrew Cuomo proposed such a local-purchasing measure.
On the theme of trade, we’ll be joined by Rona Ambrose, interim leader of the Conservative Party, 2:30 p.m. ET. She says that when Canada and the United States “get away from the handful of irritants that affect any relationship of this magnitude, our trade interests are almost completely aligned.”
More importantly, she says, the two countries should work together to make sure “China and others play by global trade rules.”
She warns that “the bilateral free-trade agreement that Canada is exploring right now is not a solution. Australia’s experience with a similar agreement shows that you can get China to lower its tariffs, but that won’t stop its regulators from discriminating against your goods and services.”
Every morning Commodities host Andrew Bell writes a ‘chase note’ to BNN's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnn.ca/subscribe.