Asia bulls dare to hope on trade talks, stimulus – Investing.com

© Reuters. A man looks on in front of an electronic board showing stock information at a brokerage house in Nanjing© Reuters. A man looks on in front of an electronic board showing stock information at a brokerage house in Nanjing

By Wayne Cole

SYDNEY (Reuters) – Asian share markets bounced broadly on Monday as investors dared to hope for both progress at Sino-U.S. trade talks in Washington this week and more policy stimulus from major central banks.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1 percent, recovering from a sharp fall last Friday.

Japan’s climbed 1.8 percent to its highest level of the year so far, while Australia’s main index rose 0.7 percent.

Shanghai blue chips bounced 1.6 percent.

But E-Mini futures for the were flat as trade was thinned by a holiday in U.S. markets.

The and the Nasdaq had boasted their eighth consecutive weekly gains on wagers the United States and China would hammer out an agreement resolving their protracted trade war. ()

The two sides will resume negotiations this week, with U.S. President Donald Trump saying he may extend a March 1 deadline for a deal. Both reported progress in five days of talks in Beijing last week.

“That does not rule out a setback or two between now and the start of March,” said analysts at CBA in a note.

“Even so, we still think that both sides have good reasons to want to get to an agreement. And, so motivated, it makes an agreement more likely than not.”

There are also growing expectations of more reflationary policies from some of the world’s more powerful central banks.

The need for stimulus was highlighted on Monday by data showing a sharp slide in Singapore exports and a big drop in foreign orders for Japanese machinery goods.

Beijing is already taking action with China’s banks making the most new loans on record in January in an attempt to jumpstart sluggish investment.

Minutes of the Federal Reserve’s last policy meeting are due on Wednesday and should provide more guidance on the likelihood or not for rate hikes this year. There is also talk the bank will keep a much larger balance sheet than previously planned.

“Given the range of speakers since the January meeting who support “patience,” the Fed minutes should reiterate a dovish message overall,” said analysts at TD Securities in a note.

A roll call of Fed officials are speaking at various events this week including a round table on Friday covering the future of its balance sheet. [FED/DIARY]

EYEING THE ECB

The European Central Bank’s Olli Rehn told a German newspaper on Sunday that recent data point to a weakening euro zone economy and interest rates would remain at the current level until monetary policy goals have been met.

That came amid much speculation the ECB would launch another round of Targeted Long-Term Refinancing Operations (TLTRO) to support bank lending.

The risk of an easy ECB saw the euro touch a three-month low on Friday before bouncing on dovish comments from Fed officials.

The single currency edged up to $1.1309, but was still within the $1.1213/1.1570 trading range that has held since mid-October. The dollar was steady on the yen at 110.53, having backed away from a two-month top of 111.12.

Sterling was a shade firmer at $1.2909 ahead of Brexit talks between British Prime Minister Theresa May and European Commission President Jean-Claude Juncker this week.

All of which left the dollar at 96.811 on a basket of currencies, inching away from last week’s top of 97.368.

In commodity markets, firmed 0.28 percent to $1,324.70 per ounce.

Oil prices reached their highest for the year so far, buoyed by OPEC-led supply cuts and U.S. sanctions on Iran and Venezuela. [O/R]

was last up 36 cents at $55.95 a barrel, while futures rose 20 cents to $66.45.

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Canopy Growth Wowed On Earnings – Seeking Alpha

What a wild time to be in the market. With the legalization of cannabis for recreational purposes in Canada, continued acceptance on the global stage for it, and with even the US becoming more tolerant of the plant and its byproducts through recent legislation that has essentially legalized industrial hemp, this is a fascinating time to be investing and to be involved in the cannabis space specifically. This is even more true after news broke that Canopy Growth Corp. (CGC), the undisputed leader in the space, recorded some really interesting financial results for the third quarter of its 2019 fiscal year. Based on what management had to demonstrate, it appears clear that not only is the firm still the major market leader, it’s likely to remain that way for the foreseeable future, a situation that could, over time, create real value for shareholders.

A disclosure

Unless otherwise stated (and only then on a case-by-case basis), all references to ‘$’ or dollars will be references to Canadian dollars.

Growth is explosive… but there are caveats

It’s rare to see a multi-billion dollar company where you can claim that growth is truly explosive. Canopy is one such case. During its third quarter, which was the first quarter (but not full quarter) where cannabis was legal in Canada for recreational purposes, revenue for the business skyrocketed 282% on a net basis from $21.7 million in the third quarter of its 2018 fiscal year to the $83 million the company generated in the third quarter of its 2019 fiscal year. On a gross basis, sales were actually even higher at $97.7 million, but management is required to pay excise taxes on what it sells. Total cannabis shipped amounted to 10,102kg during the quarter.

This surge in revenue for the firm came in the form of recreational sales. During the quarter, the company sold 8,287kg (kilograms) of cannabis for recreational purposes. This was up from nothing the same time a year earlier. According to management, 33% of revenue for the firm came from sales tied in one way or another to oils. This was up from just 23% in its 2018 fiscal year. The company continues to focus on the recreational space by producing and selling oils, softgels, oral cannabis sprays, and pre-rolled joints. In particular, the oils and softgels have significant uses in the medical space.

In the recreational area, Canopy had some interesting results that I would not have expected. When I think ‘recreational,’ I think of business-to-consumer sales more than business to business, but what management disclosed was that of the 8,287kg shipped (which accounted for 82% of the firm’s volume for the quarter) that fell under recreational, 7,381kg fell under business-to-business sales. Though this may sound insignificant to some, the fact of the matter is that business-to-business sales are low-margin in nature compared to alternative sales.

The good news from this, though, is that it still leaves a great deal of upside for Canopy moving forward. According to management, during the quarter, the company had only 10 Tweed store locations opened that are company-owned, plus 1 Tweed store that is licensed, and it had only 4 Tokyo Smoke locations resulting from its acquisition of HIKU during the second quarter. Though management did not indicate a timeline for this in its earnings release or the resulting conference call, they said that they plan to open 20 more of each brand in the near future. Assuming they approach the situation appropriately, it should result in a very robust uptick in sales in the months to come. Given that rival Green Growth Brands (OTCQB:GGBXF) said that between March of this year and the end of this year that it will open 108 new locations, I can’t imagine Canopy not being able to open these 40 stores by the end of 2019 at the latest.

Another great development for Canopy during the quarter related to pricing. While a lot of its sales were low-margin in nature, with recreational cannabis selling for $6.96 per gram (with no prior-year figure to compare it to), sales prices actually rose year-over-year for its other categories, unlike in the case with rival Aurora Cannabis (ACB). According to management, the average selling price for medical cannabis in its home market of Canada totaled $9.77 per gram, up from $8.21 per gram a year earlier. International medical prices rose from $12.61 per gram in the third quarter of 2018 to $13.28 per gram in the third quarter of its current fiscal year. This kind of movement is great to see and will likely continue as management strengthens its IP (intellectual property) position and expands further into the cannabis market through consumables and other premium offerings.

The final robust development I saw related to cash on hand. In the third quarter, the company closed its $5 billion investment from Constellation Brands (STZ). This is great, but with significant investments being made, I was curious just how much of this cash would remain on the firm’s balance sheet. Well, as of the end of the quarter, Canopy had a sizable balance of $4.915 billion, up from just $429 million one quarter earlier. This suggests that Canopy has, very possibly, years of runway still. What management will do with this capital is uncertain at this time, but we do know that after making a $100 million to $150 million commitment to invest in New York’s growing industrial hemp market earlier this year, the company’s CEO said that the business will go on to invest $500 million in total by expanding its industrial hemp operations to between two and three other states in the near future.

Not everything was great though

On the whole, I applaud the management team at Canopy because I believe that not only did the firm have a knock-out quarter, I believe that management is making some great decisions on how to invest what capital it currently has. However, one dark spot for the firm was on the medical front. During the quarter, while average selling prices were higher, the business shipped only 1,815kg, down from the 2,330kg seen a year earlier. On the international front, shipments grew materially, but in Canada the firm experienced pain.

Some of this appears to be due to cannibalization due to recreational cannabis coming into play, but another factor includes Canada’s excise tax (which management said the company decided to absorb for customers). In the long run, management believes this is a temporary soft spot, with actual upside in medical (especially on the global stage) being material as countries that legalize cannabis typically do so on a medical basis first. Because of this and because international sales prices rose, I’m not too worried on this front right now, but investors should keep in mind this softness today and watch in subsequent quarters to see how management’s expectations work out.

Takeaway

By pretty much every measure, Canopy had an excellent quarter that investors should be pleased by. The firm demonstrated tremendous revenue growth, experienced nice upside on the recreational side, and posted nice evidence of strong pricing power. There was some softness on the domestic side of medical, but based on management’s own guidance, the larger picture for medical is looking up in the long run. All of these developments taken together, especially when considering the future retail growth planned for the firm, makes me bullish on the firm conceptually. I have little doubt at this time that if current trends persist, Canopy will remain at the head of the pack in its space for the foreseeable future.

A community of oil and natural gas investors with a hankering for the E&P space: Crude Value Insights is an exclusive community of investors who have a taste for oil and natural gas firms. Our main interest is on cash flow and the value and growth prospects that generate the strongest potential for investors. You get access to a 50+ stock model account, in-depth cash flow analyses of E&P firms, and a Live Chat where members can share their knowledge and experiences with one another. Sign up now and your first two weeks are free!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Bill de Blasio Does Not Appear to Be Taking the Amazon HQ2 Breakup Well – Gizmodo

Photo: Hans Pennink (AP)

Jeff Bezos yanked his would-be HQ2 campus this week in a show that Amazon simply couldn’t take the heat from New Yorkers who opposed the secretive deal and its potential implications for the city’s residents, and the Queens community in particular. After Amazon announced it was pulling out, many progressive politicians viewed the outcome as a clear victory. This group does not include New York City Mayor Bill de Blasio.

Speaking with Chuck Todd for an interview with Meet the Press, de Blasio—who has consistently extolled the tens of thousands of jobs it would have created while seemingly missing the myriad reasons it would have been a disaster for New Yorkers—slammed Amazon’s decision to walk away from the deal as “an example of an abuse of corporate power.”

“Amazon just took their ball and went home,” de Blasio said. “And what they did was confirm people’s worst fears about corporate America. Here’s the 1 percent, dictating to everyone else even though we gave them a fair deal. And I think it’s going to frustrate people all over this country to see a company treat a neighborhood and a city like that.”

The mayor still appears to believe that the corporate handouts the deal managed to negotiate were well worth it to New Yorkers, but he doesn’t seem to be letting this bad blood between Amazon and the city go. He made his feelings on the failed deal known in a Saturday op-ed at the New York Times that waffled on corporate accountability and some of the reasons New Yorkers were concerned about the deal to begin with:

As the mayor of the nation’s largest city, a place that’s both a progressive beacon and the very symbol of capitalism, I share the frustration about corporate America. So do many of my fellow mayors across the country. We know the game is rigged. But we still find ourselves fighting one another in the race to secure opportunity for our residents as corporations force us into all-against-all competitions.

He added: “Amazon’s HQ2 bidding war exemplified that injustice. It’s time to end that economic warfare with a national solution that prevents corporations from pitting cities against one another.”

Fair! But you helped craft the deal, my dude. This also seems like exactly the kind of response you might expect from anyone who got dumped on Valentine’s Day.

[NBC News]

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Power outage planned in downtown Youngstown – WKBN.com

YOUNGSTOWN, Ohio (WKBN) – There will be a planned power outage in downtown Youngstown on Monday due to equipment maintenance.

According to Ohio Edison, it is important to be proactive with tending to underground system in downtown Youngstown, which thousands of people depend on.

There are expected to be about 65 customers affected by the outages, the press release said. Affected customers vary, including churches, small businesses and governmental offices.

The first outage will start around 8 a.m. and will last until around 9:30 a.m. The second outage will start around 2 p.m. until around 3:30 p.m. 

Ohio Edison said they hope both outages will not take more than an hour. 

 

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Flurry Of Bullish News Boosts Oil Prices | OilPrice.com – OilPrice.com

Oil market sentiment has swung from bearish to bullish in the last few days as tailwinds for the commodity strengthen. A string of updates from OPEC and Venezuela, along with a couple of oil price forecasts served to push Brent to the highest since the start of the year, with prospects for the near future also positive.

OPEC said in its latest monthly oil market report its total production last month had fallen to 30.8 million bpd, down by almost 800,000 bpd, as the cartel seeks to prop up prices once again. That’s down from 31.6 million bpd in December and was in large part driven by Saudi Arabia’s efforts to accelerate the price rise by cutting more. The Kingdom pumped 350,000 bpd less oil in January than in December, at 10.2 million bpd, which was also more than it had agreed to cut.

Judging by the reaction of prices, with Brent touching US$65 a barrel earlier this week for the first time in more than a month, the “whatever it takes” approach has finally started working. Russia, meanwhile, added to the optimism with Energy Minister Alexander Novak saying it will speed up the cuts it had agreed to make this month and next.

The latest from the oil cartel prompted Goldman Sachs to issue an update on its expectations for prices and, unsurprisingly, this update was quite bullish. The investment bank said OPEC cuts will drive prices higher as they turn out to be deeper than expected and as they combine with stronger demand that will reduce inventories. Related: How Blockchain Is Changing The Face Of Oil Trading

Venezuela was the other factor that drove prices higher. After the U.S. imposed new sanctions on the government in Caracas, expectations among traders seemed to be of a quick escalation and a regime change that would limit the effect of lower Venezuelan production and exports on global markets, said Reuters’ John Kemp in a recent column on prices.

owever, the Maduro government has turned out to be more resilient than anticipated and now traders are beginning to expect a longer confrontation that could have a more lasting effect on global oil supply, with Venezuela being one of the world’s largest suppliers of heavy crude.

This is not a universally shared opinion, however. The International Energy Agency, for example, does not believe the removal of Venezuelan heavy crude from markets will have too grave of an effect on price patterns.

“What we do know is that the sanctions are already making it difficult for PDVSA to export oil,” the IEA said in the latest edition of its Oil Market Report. “Even so, headline benchmark crude oil prices have hardly changed on news of the sanctions. This is because, in terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations. Stocks in most markets are currently ample and, with the implementation of the new Vienna Agreement at the start of the year, there is more spare production capacity available.”

However long the Venezuelan situation takes to resolve, previous supply shocks of a similar kind suggest the market’s reaction is strong at first but later mellows out and prices stabilize in the absence of another shock. Whether this is what will happen now as well, in spite of the OPEC cuts, remains to be seen. Especially given these cuts may have to be extended over a longer period of time than the initial four months to April: oil demand forecasts are still on the bearish side.

By Irina Slav for Oilprice.com

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