Last trading day of the month, Black Friday begins, Canada’s economy sputters
We achieved a new level of parenting nirvana this morning. All three kids woke up, bypassed our room and played downstairs amongst themselves. Yes, they used my vintage tea cups to throw themselves a tea party. But if that is the price of an extra 14 minutes in bed, I’ll pay it all day long.
Stuffed: Futures are higher this morning and the TSX advanced to another all-time high. It is the last trading day of the month and the S&P 500 is headed for its best monthly gain since February. The TSX is best since July. European markets are a touch higher as German inflation surprised to the downside, but the core numbers are still sticky. Flash euro area inflation rose 2.9% while services inflation slowed only modestly to 3.9%. Nevertheless, the market priced in greater odds of a 50 basis point rate cut by the ECB in December moving from 15% chance to an 18% chance. The Yen is rallying after Japanese inflation surprised to the upside and raised the expectation of an interest rate hike. This comes as the US dollar is poised to snap an 8-week win streak on the view that Trump’s tariff plans are all hat and no cattle. Today is a shortened trading day in the US with the stock market closing at 1pmET and the bond market closing at 2pmET. Canadian markets are open as usual.
Stall speed: Canada’s economy expanded at a tepid pace in the third quarter and the hand-off to the fourth quarter suggested further weakness. Statscan says Q3 GDP grew just 1%, which is below the Bank of Canada’s forecast for 1.5% growth. While household consumption remained strong, the biggest drag was in business investment. Government spending also help to offset the weakness. This is not what economists and investors like to see, the Canadian dollar fell after the print this morning. For the Bank of Canada it likely means they have the cover to continue cutting rates. CIBC’s Andrew Grantham said even with the strong consumer the GDP print “is supportive of a 50 basis point cut at the December meeting.” The next meeting is scheduled for December 11th.
Taken to the woodshed: Shares of Applied Therapeutics are plunging more than 70% in the pre-market. The biotech said the FDA rejected its drug meant to treat a rare genetic metabolic disorder where the body can’t process galactose (found in milk and some other foods). The rejection is clearly a shock. The stock was up 155% before this and every analyst rated it a buy. RBC is the first to downgrade saying there are now significant uncertainties about the path forward. Worth noting that this specific drug was just rejected for a specific disorder and has applications pending to treat other neurological and metabolic disorders. William Blair is keeping its outperform rating saying there is the potential for a meeting between the company and the FDA that could “provide clarity on the path forward.”
Shop til ya drop: Black Friday kicks off today, I’ll be watching retailers. Nearly 184 million Americans are planning to shop between now and Cyber Monday according to the National Retail Federation. Scotia says this could be big for Shopify. They expect a nearly 22% increase in the value of goods sold on Shopify platforms across Black Friday and Cyber Monday. Total gross merchandise value could hit $11.3 billion, the analyst says. This would be well above the growth the National Retail Federation is expecting for total spending. The NRF says growth will be between 2.5-3.5% from last year. However, as we’ve seen from earnings season, this has not been a rising tide lifts all boats story. While Walmart shares are at new records, Target plunged.
Signs: The Chinese crypto millionaire that bought a banana duct taped to a wall for $6.2 million has removed it and eaten it. I know food inflation is out of control, but surely there was a cheaper alternative. Justin Sun bought the rights to the art installation back in 2019. Before you ask, he didn’t eat a 5-year-old banana. The banana is regularly replaced, and this one was purchased for $0.32. Sun is the founder of Tron which is a blockchain platform. Last year he was charged by the SEC with fraud and securities violations. Bitcoin continues to evade $100,000 but there is no denying the tremendous run we have seen. And while no one knows exactly when the top will be, as the saying goes, there will be signs. And eating a $6.2 million banana might be one of them.
CORRECTION: An earlier version said the ECB rate decision was in September. The meeting is in December. I regret the error.
